Friday, January 30, 2009

Things you must do in 2009

Depending on which way you look at it, the global economic slowdown presents both, a dampener and an opportunity. Either you can choose to cut your losses and run for it; or hang in there and carve a scrumptious pie for your brand. Some tips for the strong-hearted...

What’s common to Hyatt Corp., Burger King Corp., Microsoft Corp. or FedEx Corp. or CNN or MTV? They all debuted when the economy slowed down. Yes it’s true, a lot of today’s well-known and successful organisations were born during a slump!


It’s said when things slow down, that’s when true winners emerge and they almost always beat the competition by creating something new, something unique. Topping the list is Apple. The company worked on iTunes, iPod and its retail stores during the last slowdown and once the growth momemtum returned, Apple was ready to destroy and crush all competition.

Now is the time for one to innovate. Now is the time when creativity shouldn’t be sacrificed at the cost of squeezing costs. In fact, now is the time to watch, to look around, and to plan. As Stephen Covey put it in his best seller book 7 Habits of Highly Effective People this is the time to sharpen the saw. This is the time to get into the market and create a competitive advantage. This is the time for true entrepreneurs to show the world their mettle. About 40 years ago Mao sent millions of China’s teenagers to villages to learn from the peasants. Many of them became China’s first entrepreneurs and a lot of them today have become really wealthy. The Chinese government is once again embracing Chairman Mao’s “Shang Shan Xia Xiang” or “Climb the mountains and go down to villages” policy of 1968. It’s hoping this will give rise to a new generation of entrepreneurs as it plans to once again send thousands of young people to villages to develop their business acumen.

As the economy slows, the speed with which new ideas services and products are being introduced is increasing. Ben Sann, a 20-year-old has introduced which allows customers to scan the parking lot prices in four major cities and figure out which ones have the best deals. His sales have hit $250,000. Innocent, the famous brand selling smoothies in Europe, has chosen this time to branch out into convenience foods with a new range called VegPot. Tesco is planning to launch a bank. It feels there is a need for this service and people trust it hence this is the best time to introduce it. “Travelodge” has applied the budget airline model to its hotel trade and is seeing an increase in its bookings by 45%.

The trick is to keep your focus on the consumer and be optimistic like these companies. Cut out the pessimism, but don’t cut out innovation and creativity. And yes, the last thing you should cut is the marketing budget. There is some pretty scientific evidence out there that cutting ad spends has a long-term detrimental effect. In fact, now is the time when ads will have to work harder than ever. So it’s the creativity that will matter the most. Remember that if you have a good product offering – whatever the times – people will certainly buy it. After all, it was during the 1982 recession that the now-ubiquitous personal computer was born.


The moment the economy slows down, the first things that marketers cut is the advertising budget. However, even though it sounds unbelievable, facts show that since 1854 there have been 28 recessions (on average of one every four or five years) and during each of the recessions of the past 50 years consumer spendings have gone up, not down (on the basis of reports by Jim Cox). So this probably is the best time to advertise. More so because most of your competitors would have slashed their ad budgets, making it easier for you to differentiate your product and stand out from the crowd. It is during such times that winning brands take a lead.

Kellogg and Post were close competitors in the breakfast cereal market in 1929. When the Great Depression started Kellogg’s maintained its advertising spend while Post cut back. Till date Post has not been able to beat Kellogg’s dominance in this category. Similarly Philip Morris and Revlon did not cut back on their advertising spends during the 1975 recession and gained market share, while Avon and Hershey cut and lost. Pizza Hut and Taco Bell ate into McDonald’s market share during the recession of the 90’s when the latter cut its advertising budget. In the same year Kraft salad dressings and Jiff peanut butter, both raised their marketing budgets and their sales increased correspondingly by 70% and 57% respectively! Times are hard, but it is times like these that give you that unique opportunity to stand out. It’s time to be aggressive – but wise. Ads during a slow down need to be positive and sensitive. Look at Walmart’s current ad campaign “Save Money. Live Better.” It seems to work fabulously. Don’t badmouth competitions as it might backfire (remember the BJP advertisements in Delhi badmouthing Congress – they didn’t work). Use your imagination and cost-effective advertising techniques. Have alternative plans and monitor each closely to see which is working the best.

The first reaction of most is to cut budgets. But remember, every time you cut, you give the consumer a chance to forget. According to Thomas Garbett who researched 30 companies during the 1981-82 slowdown, “Memory decay can be as rapid as a few months.” Importantly, ads shape perceptions of consumers and you cannot just stop doing it. After all, clear brand association and leadership comes through communication. From Chevy to P&G, all knew this and kept advertising – for that’s the only way to maintain brand loyalty. People associate stability with brands that keep advertising. Moreover this is the time to get some of the best media deals too. A slowdown in fact is the right time to build a greater share of market through aggressive advertising and marketing. This is the time to do things differently from your competitor and stand out.

John Von Neumann invented the ‘Game Theory’ while playing poker and he realised what winning was all about. He said, to win, you don’t play based on your knowledge of probabilities, but on the knowledge of your competitors’ psychological needs and behaviour patterns. This is the right time to study your competitor and do a little more than him, you will standout doubly. Good times or bad times, never forget your basics. According to Ken Wheaton in Advertising Age, “For all the talk of change, for all the rhetoric about new media, Barrack Obama rode to victory the old fashioned way – he outspent his opponents.” No wonder the media paid him back dearly with positive articles over negative ones by a margin of 7:1, more than any politician in American history.

This is the time for you to be innovative and creative. Go, put on your thinking cap and dream big – if nothing else make friends with Oprah Winfrey. Look what she did to “Kindle”, Amazon’s version of the digi–book. The moment Oprah endorsed it, its sales sky-rocketed and today its back-ordered until next year! Every marketer knows the power of “O”. For the not-so-lucky ones, lets decide that optimistic, creative, aggressive marketing and advertising are the things we’ll do in 2009.

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