RESEARCH & IDEAS Marketing Your Way Through a Recession Published: March 3, 2008 Author:

In a recession, consumers become value hard times loom, we tend to retreat to our durability, safety, and performance are in. New oriented, distributors are concerned about cash, village. Look for cozy hearth-and-home family products, especially those that address the new and employees worry about their jobs. But a scenes in advertising to replace images of consumer reality and thereby put pressure on downturn is no time to stop spending on extreme sports, adventure, and rugged competitors, should still be introduced, but marketing. The key, says professor John individualism. Zany humor and appeals on the advertising should stress superior price Quelch, is to understand how the needs of your basis of fear are out. Greeting card sales, performance, not corporate image. customers and partners change, and adapt your telephone use, and discretionary spending on strategies to the new reality. Key concepts home furnishings and home entertainment will When economic hard times include: hold up well, as uncertainty prompts us to stay • Brands that increase advertising during a at home but also stay connected with family and loom, we tend to retreat to downturn can improve market share and friends. our village. return on investment. • Early-buy allowances, extended financing, Now may be the time to 5. Support distributors. In uncertain times, and generous return policies motivate no one wants to tie up working capital in excess distributors to stock your full product line. drop your weaker inventories. Early-buy allowances, extended • In tough times, price cuts attract more distributors and upgrade financing, and generous return policies motivate consumer support than promotions. distributors to stock your full product line. This • CEOs must spend more time with customers your sales force. is particularly true with unproven new products. and employees. Be careful about expanding distribution to 3. Maintain marketing spending. This is lower-priced channels; doing so can jeopardize not the time to cut advertising. It is well existing relationships and your brand image. Editor's Note: Harvard documented that brands that increase However, now may be the time to drop your professor John Quelch writes a blog on advertising during a recession, when weaker distributors and upgrade your sales marketing issues, called Marketing Know: competitors are cutting back, can improve force by recruiting those sacked by other How, for Harvard Business Online. It is market share and return on investment at lower companies. reprinted on HBS Working Knowledge. cost than during good economic times. 6. Adjust pricing tactics. Customers will The signs of an imminent recession are all Uncertain consumers need the reassurance of be shopping around for the best deals. You do around us. The spillover from the subprime known brands, and more consumers at home not necessarily have to cut list prices, but you mortgage crisis is weakening both consumer watching television can deliver higher than may need to offer more temporary price confidence and the consumer spending—much expected audiences at lower cost-per-thousand promotions, reduce thresholds for quantity of it on credit—that has been buoying the U.S. impressions. Brands with deep pockets may be discounts, extend credit to long-standing economy. able to negotiate favorable advertising rates and customers, and price smaller pack sizes more Companies should bear eight factors in lock them in for several years. If you have to aggressively. In tough times, price cuts attract mind when making their marketing plans for cut marketing spending, try to maintain the more consumer support than promotions such 2008 and 2009: frequency of advertisements by shifting from as sweepstakes and mail-in offers. 1. Research the customer. Instead of 30-second to 15-second advertisements, 7. Stress market share. In all but a few cutting the market research budget, you need to substituting radio for television advertising, or technology categories where growth prospects know more than ever how consumers are increasing the use of direct marketing, which are strong, companies are in a battle for market redefining value and responding to the gives more immediate sales impact. share and, in some cases, survival. Knowing recession. Price elasticity curves are changing. 4. Adjust product portfolios. Marketers your cost structure can ensure that any cuts or Consumers take more time searching for must reforecast demand for each item in their consolidation initiatives will save the most durable goods and negotiate harder at the point product lines as consumers trade down to money with minimum customer impact. of sale. They are more willing to postpone models that stress good value, such as cars with Companies such as Wal-Mart and Southwest purchases, trade down, or buy less. Must-have fewer options. Tough times favor multi-purpose Airlines, with strong positions and the most features of yesterday are today's goods over specialized products, and weaker productive cost structures in their industries, can-live-withouts. Trusted brands are especially items in product lines should be pruned. In can expect to gain market share. Other valued and they can still launch new products grocery-products categories, good-quality companies with healthy balance sheets can do successfully, but interest in new brands and new own-brands gain at the expense of national so by acquiring weak competitors. categories fades. Conspicuous consumption brands. Industrial customers prefer to see 8. Emphasize core values. Although most becomes less prevalent. products and services unbundled and priced companies are making employees redundant, 2. Focus on family values. When economic separately. Gimmicks are out; reliability, chief executives can cement the loyalty of those

COPYRIGHT 2007 PRESIDENT AND FELLOWS OF HARVARD COLLEGE 1 | WORKING KNOWLEDGE | HBSWK.HBS.EDU who remain by assuring employees that the statement. Managing working capital can easily on February 19, 2008. Reproduced by company has survived difficult times before, dominate managing customer relationships. permission. maintaining quality rather than cutting corners, CEOs must counter this. Successful companies and servicing existing customers rather than do not abandon their marketing strategies in a trying to be all things to all people. CEOs must recession; they adapt them. About the author spend more time with customers and Join the discussion on Harvard Business John Quelch is Senior Associate Dean and employees. Economic recession can elevate the Online. Lincoln Filene Professor of Business importance of the finance director's balance This post is based on an article by John Administration at Harvard Business School. sheet over the marketing manager's income Quelch that appeared in The of

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