Prospects in a post-recession economy


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We recently conducted a survey of more than 500 marketing decision makers across the UK, in order to gauge marketing spend and trends during and after the recession. It revealed that during the recession more businesses were concerned about fending off customer churn than were focused on gaining new clients. Though a large majority (52%) of marketing decision-makers kept their budgets evenly balanced between new and old customer relationships. However, with better times on the horizon we found that the tilt towards retention was shifting back towards prospecting for new business, leaving an even higher majority of firms balancing spend on both evenly.

Marketing decisions are among the most difficult a company can make during the transition from an economic downturn to a more healthy business climate, especially when it comes to budget. First off, companies often have to be convinced to spend at all. Then they have to decide where to focus their budgets – on retaining existing customers or courting new ones.

During a downturn itself, the historic trend has been for most companies to cut marketing spend across the board, along with other costs, in order to ride out a recession. But that is no longer universally the case and many firms maintain or even boost their marketing budgets in a recession, operating under the theory that investing in this area during tough times helps position them to gain share when the economy turns around.

This view is not unsupported. An analysis of the Profit Impact of Marketing Strategies presented at an Institute of Practitioners in Advertising conference in March 2008 showed that there was a very direct link between share of voice in the marketplace and market share – when the first is higher, so is the other. In particular, the study found that companies that increased marketing expenditure during a recession gained additional market share when the economy began to recover.

So, firms making efforts to attract new business during the recession may have been doing exactly what they needed to do in order to position themselves to grow once a recovery began. But, as our research indicates, the recession has also inspired many firms to nurture existing customer relationships rather than seek new ones, believing that a retrenchment strategy positioned them to better weather an economic storm that has pushed many firms to the brink.

The trouble is, that habit can be hard to break – even with recovery seemingly on the horizon. At a time when consumers and business customers are cautiously loosening their purse strings, splashing out on prospecting for new customers might feel dangerously expensive.

While companies did well to nurture existing client relationships in order to prevent mass defection at a time when they might have been shopping around for better deals, it is essential that firms now seize the post-recession window of opportunity to seek out new business while still maintaining efforts to retain existing customers.

Matt Boot
Matt Boot is chief analyst at data and database marketing consultancy KDB


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