In an earlier post on How Customer-driven Innovation Helps Beat the Recession I quoted McKinsey research that showed that the companies that emerged from the last recession in the top quartile, increased their marketing spend significantly more than their less successful peers.
But that raises the tricky question of whether all companies should just raise their marketing spend during a recession, or whether only some companies should. And if only some companies should, what the characteristics of those companies are?
An interesting paper on Turning adversity into advantage: Does proactive marketing during a recession pay off? by Srinivasan et al helps answer that question. Srinivasan looked at the business success of 150 US B2B companies before, during and after the last recession. She then looked at a number of factors which might be drivers of the effectiveness of increasing marketing spend during a recession.
The research found three factors that made increasing marketing spend successful:
- An Emphasis on Strategic Marketing – Successful companies already used segmentation to differentiate customers and personalised marketing communications to develop strongly positioned brands. These provided a foundation for proactively marketing to customers
- An Entrepreneurial Culture – Companies saw the recession as an opportunity to gain an edge over the competition and invested in risky new proactive marketing to customers
- Enough Slack Resources to Refocus on Proactive Marketing – Companies had under-utilised resources such as staff, cash reserves and production capacity that they could quickly refocus on proactively marketing to customers.
These three factors read like a recipe book for sense & respond marketing. As the recession starts to bite, the ability to continuously sense changes in customer behaviour and then to reorganise rapidly to take advantage of them, is likely to be one of the hallmarks of companies that beat the recession. This applies during normal times too, but it is critical during a recession.
The 64.000 dollar question is: are you one of these marketing-driven, entrepreneurial companies with sufficient slack resources to refocus on proactive marketing? Like Microsoft, DeBeers and BMW during the last recession. Or are you one of the product-focussed, bureaucratic companies that will try and cut its way through this one?
What do you think? Can your company respond to the recession with proactive marketing? Or are you doomed, in what will probably be the deepest recession since the 1930s?
Post a comment or email me at graham(dot)hill(at)web(dot)de to get the conversation going.
Graham Hill
Independent CRM Consultant
Interim CRM Manager
Further Reading:
Graham Hill, How Customer-driven Innovation Helps Beat the Recession
Srinivasan et al, on Turning adversity into advantage: Does proactive marketing during a recession pay off?
Stephan Haeckel, Peripheral Vision: Sensing and Acting on Weak Signals Making Meaning out of Apparent Noise: The Need for a New Managerial Framework
Srinivasan’s article reminds us that customers need to be at the centre of marketing, not marketers, or the Marketing Department, or even brands. This has always been a hard message for marketers to hear. And most of them have preferred not to hear it. But if ever there was a time to pay attention, this new kind of recession is it.
This was brought home to me reading Jery Wind’s article on ‘Rigor and Relevance: A Key Marketing Challenge’ at the Sloan Management Review website. Jerry reminds us that co-creating value with customers is at the centre of today’s marketing.
It is strongly supported by Tony Ulwick’s Outcome-driven Innovation approach which looks in detail at the jobs customers are trying to do and the outcomes they are looking to achieve. If understanding customer jobs & outcomes isn’t at the very heart of effective marketing, then I don’t know what is!
It’s a win:win:win situation. Customers benefit because they get stuff that they really want. Marketer’s benefit because they have something valuable to talk to customers about. And shareholders benefit because selling stuff that customers want is a whole more effective than much of what passes for marketing today.
In many ways, this isn’t fundamentally new. Ted Levitt talked about the importance of letting customers drive your marketing in his legendary 1975 article on ‘Marketing Myopia’. Maybe it is time marketing and the marketers who practice it started to return to their roots.
Graham Hill
Independent CRM Consultant
Interim CRM Manager
Further Reading:
Jerry Wind, Rigor and Relevance: A Key Marketing Challenge
http://sloanreview.mit.edu/smr/issue/2008/summer/11/Rigor_and_Relevance_2007_Buck_Weaver_Award.pdf
Tony Ulwick, What is Outcome-driven Innovation?
http://www.strategyn.com.au/content/Public/InnovationResources/WhitePapers.aspx
Ted Levitt, Marketing Myopia
http://casadogalo.com/marketingmyopia.pdf