Tighten your belts, pull in your horns, slash the spending. Whatever way you phrase it, reducing your marketing overheads in a recession is textbook stuff. Or is it? Does the prospect of a recession really translate to spending less on telling your story?
I’d argue not.
Take the hypothesis that in a recession the market shrinks, and demand narrows too. It’s assumed that every company in your sector reduces or stops discretionary spend and freezes cash that hasn’t yet been spent on marketing campaigns.
But what if one company bucks the trend and maintains spend?
Let’s see what could happen.
It’s very likely that the businesses pursuing a strategy of cuts will experience a contraction that’s broadly in line with the wider market contraction.
This will have a knock-on effect – costs will be cut again and product quality will likely erode as cheaper widgets are used. NPD will be put on hold. Service levels will drop. And as a result, customer satisfaction will diminish. With every business in the same boat, quality and service will drop right across the market. People will become more and more disaffected by the value their preferred suppliers deliver.
In effect, customers become ‘stuck’, unable to switch provider for anything better because everyone is offering a devalued yet comparable service.
Yet we know that one company didn’t cut back. It maintained investment, making it the attractive alternative. People switch loyalty, indeed those customers who are really dissatisfied might even pay more to get the product that no-one else can provide to a high standard.
Who’s already drawing in their horns?
This scenario above is a real dilemma for companies right now. In fact, the chances are that many of your competitors have started ‘drawing in their horns’.
Product or service quality could already be diminishing in the market, and customers might have started to notice the small changes that will eventually add up to a big difference they can’t live with. It creates a real vulnerability in any company’s fortunes. A vulnerability that can be exploited by the competition.
Market reconnaissance should start now
One has to ask then, is taking a big red pen to the marketing strategy the way to go? Would it be better to spend some money finding out which competitors are moving into a vulnerable state? Where are there cohorts of customers that are likely to consider a switch?
Will you participate in a recession?
Business leaders have a choice right now and I think many would do well to remember the reaction of Sam Walton, founder of Walmart, when asked in 1991 what he thought about the recession; “I thought about it and decided not to participate”.
Interesting thought, isn’t it?
Is now the time to invest in marketing and cut costs through improved processes that drive efficiency and stimulate innovation? Is now the time to pursue a strategy of poaching because you can stand by your promises on service and quality?
Graystone Strategy can help with the market analysis you’ll need to identify who the most vulnerable competitors are, and how to exploit the situation so you grow while others around you lose their heads. If you want to find out more just drop us a mail.
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