Why Increased Marketing Works in a Bad Economy
I read a lot of articles that pertain to business & marketing. (Hazard of the job, I guess.) I found an article on American Express OpenForum particularly interesting and relevant for business owners today.
The article addresses the immediate situation facing the majority of small businesses across the country – a sluggish economy combined with increasing costs. The result: shrinking margins and business closures adding to the overall economic problem/downward spiral. If you’re a business owner, you’ve probably felt the squeeze. What caught my eye is the first point the article is making – “Don’t cut marketing: Invest more.” Sage advice, if you ask me.
It’s easier said than done, but those that intelligently invest more marketing dollars can quickly get a leg up on their competition and earn new customers. Since the competition is likely to be scaling back, it’s the perfect time to scale up – but do so wisely. Increase within your means and negotiate tough on payment terms.
In 2009, we saw a quick rise in business closures in Santa Barbara and many of our clients had declining sales, were facing potential rent increases and therefore were not sure of their future. We knew that their marketing dollars – our bread and butter – were going to be scarce so we stepped it up fast. We started by nearly doubling our own marketing budget and then hired three new sales executives, and trained them to hit the ground running. It was a calculated risk I felt we had to take and guess what? In 2009 & 2010 we had our best sales numbers ever. It was nice accomplishment, but even nicer considering we took dollars and market share from our competitors and did so in a down economy. While everyone else was stepping back, we were making a name for ourselves in the community.
We talk to and meet with hundreds of business owners each year and this issue is a common topic. I can say that from my experience, I’ve seen both sides of the spectrum. I’ve seen businesses hunker down and try to ride it out, and I’ve seen others get aggressive. Nine times of ten, the latter course of action will prevail, provided that there’s a smart plan in place with enough working capital or reserves to fund it.
By “smart” I mean really looking at your marketing options and determining which of them is most suitable towards your customer or target customer. Cost matters, but don’t buy advertising because it’s a “good deal” or on special. The same applies for overpriced marketing services and concepts – you’re not purchasing a car, just because it’s expensive doesn’t mean that it’s better.
Keep in mind that all advertising is not created equal. Some mediums are designed purely for exposure. Depending on the stage of your business and your objectives, this may be an avenue to consider. Typically, this sort of strategy works best when it’s a long term branding plan backed by lots of dollars. Most businesses are too small to sustain effective branding campaigns. Consider the TV ads for Bank of America or California Milk – these ads are not cheap and are designed for the long haul. They’re not designed to make your run out and switch banks or buy milk.
What are most effective for small businesses are advertising and marketing mediums that can be tracked. If you want to get new customers in the door, why spend money on a campaign that when it ends, you’re unsure of its effectiveness? That’s wasteful.
To put something measurable into place it doesn’t have to be fancy or expensive. Start small by offering a limited time discount to your facebook fans, or by handing out a coupon to each customer of yours for a discount on their next purchase within a set time frame. They’ll thank you for it and are likely to come back – cash in hand – sooner rather than later and are also likely to increase the amount they spend because of the discount.
When we decided to increase our marketing budgets in 2007, we put together an eight-month hybrid strategy. The brand advertising was meant to keep our name visible for the months of the year that we determined were most imperative; and the promotional tactics were implemented to directly affect sales. We knew what we were doing and we set a sales goal that directly related to how effective our strategy was. We weren’t just throwing darts. We had a target we were aiming for and we hit it.