SCHWARTZ CROSSROADS

Gut-Check Time for Marketers Means the Brave Will Win

Guest post by Schwartz EVP Dave Close

In a badly damaged and worsening economy most marketing executives aren’t thinking about spending more money. The understandable tendency is to pull back, reduce spending, stop some marketing initiatives and try to ride out uncertainty with caution.

That’s the conventional wisdom in most corporate environments, but it’s wrong. When the economy turns bad and it seems like opportunities are shrinking, the winners will be the ones who face the gut-check, take a deep breath and pour it on in marketing.  It’s easy to see why: when your competitors go silent you have a rare opportunity to fill the silence with your message.

The brave marketers – the confident, the bold, the risk-takers – will actually increase their branding and publicity efforts, although they may change their mix of marketing programs. They know their messages will get through more clearly and with wider exposure. They’ll also get more bang for their marketing buck because there’s downward pricing pressure on marketing services. The results may not show up immediately in increased sales – after all, the economy is bad. The short-term win may be to stay even and avoid declining sales. But the confident marketers are planning ahead, positioning their companies and their products to slingshot into the lead at the first signs of a recovery. This approach was discussed in a well-known Management Review article 15 years ago called “Fortune Follows the Brave,” and it holds true today.

I say this is a “gut-check” because truly confident marketing and communications executives face resistance in advocating for increased or stable spending. For example, a MarketingSherpa survey from February, 2008 (before the current disastrous economic problems took hold) showed the problem. In a tough economy, 43% of executive managers said they would cut marketing first, while just 9% said it was a time to invest in marketing. In large companies, 39% said they had seen marketing cuts already, and 21% expected cuts.  In September MarketingSherpa updated the numbers and things had taken a turn for the worse. Most of these executives were reporting on advertising spending, which is the part of the communications mix that usually gets slashed during downturns.  You have only to pick up your ever-shrinking newspaper to see that this is true.

Still, advertising is just one part of the communications mix. Once you’ve reduced or cut advertising, how do you keep your message in front of customers? As an executive at a PR agency I’ll take a courageous and selfless stand and say this is the time to increase your PR efforts. There’s a marketing saying: “it costs to advertise and it pays to publicize.” We know this from direct experience.

Our agency has been serving innovative technology and healthcare companies for almost 20 years. We started the company in the depths of the 1990-1991 downturn and we served a client based of technology startups when the tech bubble burst from 2000 through 2002. Those were times of severe spending cuts at most companies. We had clients simply stop their advertising and PR efforts. They saved money in the short term and crippled their companies over the long term.

In computing and networking technology – crowded markets with a fast pace of innovation – brand position and image are fragile things. Go into cryogenic suspension and the public will forget about you quickly. The most cost-effective way to keep your message current and to maintain or grow awareness of your products is through credible, disinterested, independent third-party coverage in the media stimulated by PR. That used to mean newspapers, magazines and broadcast. It still does, but even more important is the coverage in online information outlets, blogs, YouTube and all the other types of instant information sources. These actually amplify the impact of your PR budget by spreading coverage far and wide, beyond the original source of the story. People forward articles, but they seldom forward ads.

Some companies spend 100 to 200 times more on advertising than on PR, yet research shows PR to be just as credible a source of information to potential customers. We’ve made our reputation representing smaller, innovative companies. In good times or bad, the companies we represent see gains in awareness, positive brand image and sales leads. Think back to the 2001 downturn when Red Hat became the hottest story in the software industry. They were battling Microsoft. Our client Red Hat spent nothing on advertising; Microsoft spent hundreds of millions. Red Hat did it all through PR and word-of-mouth, and they leveled the playing field in the minds of software users.

The dynamics behind that situation apply in today’s brutal economy. PR costs much less than advertising, tradeshows or other parts of the communications mix. Along with direct marketing, it is the most effective, fastest, flexible and measurable way to communicate to your target audiences.
But it takes some courage for communicators to fight against cuts or even to secure more funding during these times.  A 2005 study "Turning Adversity Into Advantage: Does Proactive Marketing During a Recession Pay Off?" presented results from a survey of 154 senior marketing executives. I like this quote from the paper:

"Athletes often choose times of stress to mount attacks: strong runners and bicycle racers may increase their pace on hills or under other challenging conditions. In a similar vein, proactive marketing includes both the sensing of the existence of the opportunity (a tough hill and fatigued opponents) and an aggressive response (possessing the necessary strength or nerve) to the opportunity.”

In a gut-check economy, the strong – and the bold – will win.

Posted by Chuck Tanowitz on December 15, 2008 at 10:16 AM