First Word: Marketing through the downturn

Well, I wrote in April that the sky is not falling … it’s still up there, but I must admit there are a few more clouds since then. Even so, panic just leads to bad business decisions. When faced with the uncertainties economic downturn generates, the natural instinct for many is to scrutinize spending and ax items perceived as unnecessary. For companies, marketing and advertising budgets often are the first casualties of a downturn, mainly because proving value in these areas is difficult. But savvy marketers warn against this gut reaction.

A senior Intel executive told Newsweek in 2003, “the belief at the company is that you don’t save your way through a recession.” Research backs up this philosophy. According to a 2005 study by professors at Penn State’s Smeal College of Business and the University of Texas at Austin, some of the world’s most successful corporations – BMW, Cisco, Dell and Wal-Mart – used aggressive marketing campaigns during the recession earlier this decade to capture market share from competitors that cut advertising budgets. As the economy wades into a slowdown, major companies such as Proctor & Gamble and Unilever are saying they will maintain marketing spending. According to a study of 3,500 U.S. firms by Malik PIMS, those that maintained or increased marketing in 2002 saw market share increases twice as large as those of companies that cut marketing. In McGraw-Hill research that looked at advertising vs. sales trends in 1981-82, business-to-business firms that maintained or increased spending achieved higher growth during and for three years after the recession than those that cut back.

If your company is capable, sustaining or expanding marketing efforts when times are tough makes sense for several reasons. For one, it gives you the opportunity to gain market share at the expense of businesses that limit marketing, says marketing consultant Peter Field. Also, in an economic slowdown, potential customers might view companies that market their products/services as safer choices, writes Paul Dyson, founder of economic modeling and analysis firm Data2Decisions. Another thing to take into consideration is the long-term effect of advertising. Data compiled by Dyson’s company shows it takes three to four years for firms that stop marketing for one year during a recession to return to the sales level they would have achieved had they maintained marketing. Companies that cut budgets 50 percent for one year took two years to recover.

As the owner of a construction firm, you’re lucky in that many of your most effective marketing tools cost little more than your time. In addition to calling existing clients and asking what projects are coming down the pike – by far the cheapest, most efficient method of acquiring new work – you can also:

  • Create employee incentives for bringing in new projects or clients.
  • Identify customers who will be least affected by the downturn – government and higher education markets are good examples – and pay special attention to those relationships.
  • Give your current marketing program a facelift. Analyze every marketing project by asking yourself, “Does this bring in work and generate revenue?”

If you focus on staying top-of-mind with your customers now, your company will be in an excellent position to increase market share now and be in a leadership position when the economy rebounds. And finally, remember that good times and bad times have one thing in common … they are both temporary.