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Marketing in aRecession
June 2008
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...is about turning something
which is seen as a negative...
...is about turning something
which is seen as a negative...
...into a positive more revenue /
sales, greater share of voice and
better consumer relationships
...into a positive more revenue /
sales, greater share of voice and
better consumer relationships
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...the questions a marketing manager
may be asking
What does my CFO want?
What can I doto protect my budgets?
Can we hibernate to save costs?
How will my competitors respond?Does this mean we have to cutour prices?
How will consumers change?
Is there some kind ofopportunity that we can
leverage from this?How will my brand manage?
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And the general answer is:
Lay offworkers
SLASHthe Marketing/Advertising Budget
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You can turn the engine offand
feellike youre gliding...
...put simply...
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...but youre actually falling...
You can turn the engine offand
feellike youre gliding...
...put simply...
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...but youre actually falling...
You can turn the engine offand
feellike youre gliding...
...and it takes more power ($) to get back up to your previous
height, let alone go higher than before
...put simply...
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Why not Reduce???
Advertisement shows that your company ishealthy
Garner consumer trust
Stable company
Slowdown ofconsumer spending, but not acomplete halt
Less advertising clutter for consumers to wadethrough
BRAND Image and loyalty
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When we look at a recession we tend
toonly focus on the threats
Threats
1. Spiralling price war
2. Competition for share of
SMALLER wallet3. Consumers confidence
reduces less money in
the market
4. Consumers hunting
bargains
5. Competitor activitydifficult to predict
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butthere are alsohuge
opportunities
Opportunities
There are several
opportunities we can discuss,
but we have focused on two in
this section
1. The cost of
communications deflate
meaning your money can
go further
2. Cheaper CPT channels with
better ROI help with the
CFO!
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Five tips
1. Press for better media deals
2. Reflectthe consumer mindset with a resonantmessage
Wendy's - Message: "Look, I know you have less tospend these days, butthat doesn't mean youhave to eatless."
IKEA - Message: "What recession? Sure thecountry's going through a recession. Thatdoesn't mean you have to."
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3. dontignore your current customers
Ittakes five times more money, time and effort
toacqu
ire a new cus
tomer
than
it
does to keep an existing one.
- Frederick
Reic
hhe
ld, T
he L
oya
lty E
ffec
t(1996)
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4. Gofor direct marketing
5. Test Test Test Innovative methods and newtools ofadvertising
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Last recession
Hindustan Unilever Ltd (HUL) is planning toincrease its ad expenditure this year.
Godrej Industries Ltd is tripling its ad budgetto gain high visibility for allitsproducts. Last year, the Godrej Groups advertising budget was around Rs 60 crore.
Tata Tea and Marico Industries have alsohiked their advertising budgetto pumpup volumes.
Emami, the Rs 700-crore FMCG major, is targeting Rs 300 crore, ensuring a 30 percent growthin sales from its summer care brands. Emami, whichowns brandssuch as Boroplus and Navratna, has declared a 25 per cent growthin FY09. Emamiwillinvest Rs 60-70 crore on advertising and promotions for its brands.
In spite of a slow year for consumer electronics industry in 2008, LG ElectronicsIndia managed to clock revenues ofRs 10,730 crore, a 15 per cent growthover2007, in line withits 2006 growth rate. The net profit margin was at4 per centofsales despite severe pressure on raw material costs. LG willincrease ad and
marketing budget by 10 per centto Rs 400 crore in 2009. In line withits strategy,LG grew by 20 per centin January and February. The company hopes to save $384million through cost cutting and efficiency-improvement measures in 2009.
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Historical Examples
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Recession Born Legends
IBM 1981
iPod 2001
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P&G During the Great depression they
pushed their Ivory soap
Intel during 1990-1991 pushed the campaign
Intel Inside
Walmart launched everyday low prices
campaign during 2000-01
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1974
Connecticut's Stanley Works, one ofthe world'slargest manufacturers ofhand tools
In the heartofthe recession, itlaunched the
bigges
tadver
tis
ing campa
ign
in
its
his
tory-a b
litzofnetwork TV and magazine ads aimed at driving
home the Stanley name tothe consumer market.
The campaign worked, giving the company a largesales and profitincrease in 1974 and preventing asubstantial decline in 1975.Additionally, its handtool business has continued to grow at an 8percent annual rate-twice thatofits competitors.
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GM
Another example is General Motors' Chevrolet division,whichfaced mounting inventories in 1975 due totherecession and highfuel prices.
The company abandoned its traditional practice ofsetting
its advertising expenditures as a fixed percentage ofsales. While volume fell 10 percent because ofthe economic
slowdown, Chevrolet maintained its ad budget and actuallyincreased advertising for its fuel-saving economy models.
Ford Motor Company, on the other hand, slashed
advertising by 14 percentin an attemptto shore up profits.That may have achieved its goal, butit permitted Chevrolettoincrease its market share by 2 percent.
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Kellogs
During the GreatDepression, Post was the leading cereal brand. In factit was the
only cereal brand people would have thoughtof atthe time. But, due tothe
Depression, money was tight and sales were falling.Postfigured they did not need
to continue advertising because they ownedthe market (for cereal) and they
needed to cut expense. Cereal was considered a luxury anyway.
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Kelloggs, on the other hand, took advantage ofthe economy that was suffering. They created apositive ad campaign featuring Tony the Tiger andthe very positive and enthusiastic Kelloggs sloganTheyre GREAT! They DOUBLEDtheir adbudget, and bought ad spots in newspapers andradiotime across the nation.Americans lovedTony the Tiger and the positive message he sent
during a very negative time. Kelloggs brandbucked the trend, and grew quickly, in a timewhen money was tight by keeping their brandtop-of-mind.
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During a recession people shop value stores tosave money and pick value brands for their
essential needs. Nike refused to sellits shoes in
Target,
fear
ing
tha
ts
he
lfpresence
in a b
ig-b
ox
retailer might damage its brand and reputation.So, they bought Converse for $305 million
because Converse had a lower price pointtobegin with. Converse sold so well at Target and
other retailers, Nike made back its entireinvestmentin one year.
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Selective exampleIntel Inside case study bucking the trend altogether
Intel launched its iconic campaign amidst recession
At a time when the rest of their category was competing on price alone.
Intel took their premium positioning directly to consumers.
Intel took advantage of a soft competitive market to aggressively deliver its message
Results63% increase in sales world wide
Became the third most valued brand in the world (behind
Marlboro and Coca-Cola).
Within two years, preference for the brand had risen to
80% and the company claimed more than 75% of the
microprocessor market
Source: Encyclopaedia ofMajor Marketing Campaigns
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Conclusion
Advertising builds strength: Companies thatinvestmore in advertising over a period ofyears experiencefaster growththan those that spend less.
Advertising speeds recovery: Co
mpanies
tha
th
aveincreased their advertising during a recession haverecovered more rapidly than their counterparts thathave maintained or reduced advertising.
Advertising affects sales: Organizations thathave
continuously increased their advertising investmenthave enjoyed similar increases in sales.
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Thank you