Recession: A problem? Dial ‘M’ for Marketing

Posted in Marketing & Strategy Articles, Total Reads: 3095 , Published on 19 March 2012
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“We have a philosophy and a strategy. When times are tough, you build share.”- P&G CEO quoted in The Wall Street Journal. P&G launched its first soap opera and its first detergent, ‘Dreft’ at the time when the world was gripped with recession. Their success proved that it was a far-sighted approach. Added to it, the unique cost cutting marketing innovation it did by advertising extensively on radio, is today one of the most effective modes of communication.

Recession

In economic terms, a recession is a period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters. With the world getting several jolts of such downturns, there arise numerous questions in front of the corporate in present times. It gets tempting to cut down costs. But the biggest conundrum is: where to start and where to stop while doing so; whether to focus on market-share or the bottom line,innovate, cut down ad spending or position the products in a new way and a lot many other questions.

While there is no tailor-made set of strategies that fits all in such a condition. The effect of the downturn is different for different types of companies, depending on the industry they are in, their target market, the category they are dealing in, their market position etc. But applying certain industry specific marketing insights companies have not only steered the helm, but also strengthened the company’s position in the long run. Unilever is one such player in the market. During 2002 recession in Brazil, it launched ‘Diva’, basically to communicate with its key customers. The ‘community’ feeling it generated in the minds of the customers was unique and ‘talks’ on money making ideas, information about beauty, nutrition, fashion, recipes etc. to ‘make lives easier’ bolstered the brand and helped it develop a relationship which paid huge dividends both during and after recession.

A smart step during recession shows a better reward in recovery. This is what the study by PIMS (Profit Impact of Market Strategy) showed via its study of nearly 1000 business from the 1970s to the 1990s. These businesses and their strategies of cutting down, maintaining and increasing specific costs were studied in detail and analyzed in respect of the ROCE during recession, during recovery and impact on market share in first 2 years of recovery. As a result of all this, the study advised, “In a recession dare to invest aggressively in marketing, innovation and customer quality.” This was portrayed during the oil turmoil in 1974; BMW had the nerve to re-brand itself as a luxury sedan maker with the slogan “Ultimate Driving Machine”. The slogan has persisted through time.

The best example of understanding recession and leveraging it for success is launching of Fortune Magazine four months post 1929 depression. Getting deeper into the strategy, it was a time when people’s interest in business affairs was heightened. Henry R. Luce identified it and gave the market a bundle that satiated their needs, which Wall Street Journal or even his own baby Time Magazine couldn’t do. Result: Fortune had approximately 5 lakh subscribers by 1937. Professor Andrew Razeghi of the Northwestern University said, “Fortune magazine worked not in spite of the Great Depression. It worked because of the Great Depression.”

In recession, there are job cuts, smaller pay cheques, and uncertainty. The customers hold their money tighter and nothing can loosen it but a clear value proposition. Elizabeth A. Sullivan talks of ‘austerity marketing’ during recession which involves creating incentives beyond the discounts and coupons which already flood the marketplace, and making very clear to the consumer why offerings are worth the money and how they are relevant to the purchaser’s needs or desires. Dell scored on this front by doing away with the retail chain and adopting direct to consumer selling. Land Rover told about the lower cost of owning the vehicle and higher resale value, in the market of cheaper alternatives.

Customers not only buy a big SKU that is cheaper per unit but may also go for premium brands if they feel they are getting value for their money. Consider L’Oreal. Its ‘Because you’re worth it’ campaign rang well with the customers in times of gloom. It is not advisable for the companies to strip down their product for lower costs and sell to the budget constrained consumers.

Besides all, there can be fresh and altogether empathetic perspective of communicating with customers. When the US telecom giant AT&T sent out the message of “Rethink Possible” in times of monetary gloom, and Levi’s tried to catch the Americans to “Go Forth” through its ‘ready-to-work’ ads, it was pure communication that rang well with people.

As a marketer, it is vital to pick up the hints thrown by markets, especially when the hints are the most vivid: precisely that happens in a recession. Razeghi says a recession does not make market needs disappear. “Not only do they still exist, new needs emerge.” Moreover, Marketers have a higher chance of gaining share through increase in advertising during market recession. Cutting advertising does not increase short term-term profits, let alone long-term profits. So go out and spend marketers but be a little careful and innovative.

This article has been authored by Pallavi Mishra from SCMHRD and Pratyush Raj from XLRI.

Image: suphakit73 / FreeDigitalPhotos.net


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