The Post Virus Recession


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The economic effect of the covid19 virus pandemic will be world-wide. The situation is unprecedented in every country where the economy has been locked down, so that commercial and cultural activity has ceased by order of their respective governments.

Economic life depends on the circulation of money. The faster money circulates so the economy grows. When the circulation slows, in this case by order of respective governments, the money does not circulate and the economy goes into recession. As a result of the enforced shutdown, many business may be forced to close, resulting in increased unemployment. Because the lockdowns were directed by governments, customer demands were not lessened, but deferred. Restarting stalled economies will take time, requiring confidence to be restored, money to be available to circulate in order to facilitate demand, as well as employment capacity to satisfy it.

There is now a general recognition that a recession is likely to arrive in the wake of the corvid 19 crisis, which will manifest itself in both an enforced reduction in demand and fewer business transactions. The usual reaction of companies to this situation is to batten down the hatches and to look for cost cuts and budget reduction.
Those in charge of the business development or marketing budget are often seen as the first in line when it comes to cost cutting, but should this really be the case? How should marketers respond when asked to make cuts in expenditure?
Marketing is the name of the commercial management process that produces profitable income, which is the sole purpose of any business, and is defined as “all those activities which anticipate and satisfy customer demand profitably”. Thus the marketing function of any business has the responsibility of producing all the profitable revenue for the business, using all its activities to anticipate and satisfy customer demand. For the commercial manager in charge of all marketing activities, the objective is to maximize sustainable profitable revenue while minimizing costs and the use of marketing assets. Thus the marketing function is the driving force for any business in producing and maintaining the levels of profitable revenue.
At a time when demand is reduced, everyone has to work harder and maximize efficiency to ensure the continuing production of the necessary revenue. It follows that arbitrarily cutting expenditure on all those activities involved in getting and maintaining business may damage the ability to produce revenue, especially at a time when competition is likely to strengthen when demand is weakening.
The successful commercial manager needs to be both creative and effective in managing resources. This is particularly important in times of economic and market astringency. The commercial manager needs to be able to analyse all marketing activities with quantified performance measurements. As an effective manager, the commercial manager should be able to justify all elements of the marketing budget with quantified evidence of its contribution to revenue production. They must also be able to identify those activities which are the most cost effective in marketing contributions and which are not. If necessary, resources should be redistributed to concentrate effort on those areas which provide the best return on marketing investment. Always must be asked the questions;
* Is this an investment or cost?
* What does it contribute?
* How do we know?
* If this action was cut or reduced what would be the consequences?
* How do we know?
A full understanding of the cost, benefit and contribution of all marketing activities to the generation of sustainable profitable revenue gives the commercial manager a strong position when defending against arbitrary budget cuts. Such knowledge ensures that if such cost cuts are unavoidable, that they can be confined to activities which will do the least damage to the production of sustainable revenue.
While a recession is generally a period of reduced demand, revenue and profit, it can also be a time of opportunity and creativity. For the commercial manager, recession requires a constant monitoring of marketing productivity to maximize the efficient use of assets. At the same time, austerity can be the mother of invention. Do market conditions dictate a change in how the market is accessed and satisfied? Would a review of marketing processes reveal alternative methods that could prove more efficient and cost effective? Is there a change in customer demand that requires a new product?
The commercial manager’s job is to manage assets and investment efficiently to maximize sustainable profitable revenue. While successful commercial managers need not themselves be creative, they need to foster and maintain a creative atmosphere within their marketing specialists especially during time of austerity and recession.
Successful management of marketing requires good leadership, especially in difficult trading conditions. Even successful marketing teams can become demoralized and less effective if their morale and motivation is not maintained. In the worst case good and experience marketers may leave. The commercial manager can only be successful in the mission of delivering sustainable profitable revenue with the aid of a successful marketing team. Commercial managers must rely and encourage the creativity of other professional marketers, because they are the prime asset of the marketing function. If, because of the size of the business or the size of the marketing team or the particular challenge of the market, that pool of creativity is deemed to be insufficient, then the commercial manager should seek additional creative input via consultants, specialist outsourced agencies, or qualified interim staff.
When it comes to difficult economic times, the commercial manager’s prime responsibility is to maintain the levels of profitable revenue. Cutting the marketing budget, without a full understanding of the implications is dangerous.

Reducing the financial costs in the immediate short-term, without carefully considering the implications, may dangerously compromise the ability to produce the necessary income for the long-term future of the business. The commercial manager must therefore maintain the assets of the marketing team in order to be able to take advantage of new opportunities as they arise and to justify the necessary expenditure and reinvestment required with quantified data of marketing performance.

Nicholas Watkis, AE MA DipM CMC FCIM
Nicholas Watkis set up Contract Marketing Service in 1981, providing professional interim marketing management for a wide variety of businesses. Over 30 years practical experience in organizations, large and small, national and international, led to the development of Business Performance Maximized specialist in marketing performance measurement.


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