Marketing Wisdom for Difficult Times
We are all struggling to make the best possible decisions in these unprecedented economic times, torn between short-term budget decisions and long-term growth. The Marketing Science Institute (MSI) recently gathered a set of their working papers to determine what guidance they could provide to marketers. According to Russ Winer, Executive Director of MSI, �While firms are often tempted to reduce their marketing expenditures to boost profitability, these studies suggest that this is not necessarily the best approach. For example, short-term gains in profits may come at the expense of long-term gains in loyalty and satisfaction. In general, the authors find that going against conventional wisdom can be the best approach to take in recessionary periods.�
MSI cited these guidelines for marketing in difficult economies.
Have a long view
Managers have a lot of pressure to cut marketing and other expenditures in order to inflate current-term earnings and stock price. Research has shown, however, that myopic marketing management has a detrimental long-term impact on firm value with long-term stock returns that are significantly lower than other firms.
Remember and communicate the key factors that drive marketing�s influence in the organization: (1) demonstrating marketing productivity, (2) �marketing� marketing as an investment not an expense, and (3) emphasizing marketing�s role in building and maintaining brands, and through these brands, building long-term customer loyalty.
Create customer satisfaction, retention and loyalty
In a resource-constrained environment, service businesses need to target their quality improvement efforts, without undue regard for cost savings. Research shows that firms that focus on satisfaction and retention to grow revenues perform better than those that also try to focus on cost reduction.
Consumers switch to private labels during economic downturns faster than they return to national brands when the economy improves. Because of this longer-term positive effect on private label demand after a recession, research shows that national brand managers should increase their marketing efforts during these periods to mitigate the inroads made by private labels.
Evaluate advertising expenditure
For firms with large advertising expenditures, and especially for consumer and industrial products firms, research shows that increased spending during a recession improves firm performance more than similar spending during non-recessionary periods.
Tailor your response to your organization
Not all firms do or should increase marketing expenditures in a recession. Firms that place a strategic emphasis on marketing, have an entrepreneurial culture, and have slack resources plus the flexibility to deploy them are more likely to increase their marketing activities in a recession and be successful doing so.
Keep in mind that investing in marketing research can help you make these decisions and to ensure the long-term success of your organization. Information geared toward better decision making and understanding customer perceptions amid the economic turmoil can be a wise decision to guard against miss-steps.
Here�s the link to more information on these working papers:MSI - Marketing in Turbulent Times
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