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 Editor's Note
If the economic news is gloomy, the weather in Annapolis in early October certainly has not been. It's been beautiful and clear, and the leaves are turning. At first it was unseasonably warm with very light winds. This past week it has cooled down and the wind has picked up.
The wind has been very shifty and it has made sailboat racing very challenging. Not only do we have to change gears when the wind velocity changes, we have to react when the wind direction shifts. A few weeks ago, we learned a really valuable lesson.
We were first in the fleet coming around the upwind mark. Downwind, we kept our lead. As we came around the downwind mark and began heading upwind the second time, we decided to stick to our successful strategy that had worked so well on the first upwind leg.
However, we failed to take into consideration the fact that the wind had shifted direction. We knew it and talked about it, but we didn't make the connection that we should change our strategy. We sailed away from the mark on one tack as we had before.
Behind us, one boat after another sailed away on the other tack. After about ten minutes, we realized they were ahead of us. We tacked over, and did our best. Sailing agonizingly slowly in the light air, we watched boat after boat finish in front of us. We finished in a very disappointing ninth place.
How can we take this off the water and into the office?
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Molly Hughes Wilmer
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Feature
Show Me the Value
Corporate performance does not occur in a vacuum. Successful results are generated when a company's strategy best leverages current market conditions. Successful strategies usually need to adapt to changing market conditions.
Marketing is informed and influenced by psychology, sociology, and economics. As a result, it is the corporate strategic element that is usually the most sensitive to changing economic conditions.
Marketing, when defined and practiced properly, is a revenue generator. A sophisticated mix of marketing tactics can be measured subjectively and objectively in terms of the revenue they generate. Marketing generates value for a company—in more ways than just income. But some marketing tactics, and when and how they are executed, generate more value than others.
Respond Appropriately
Things are happening quickly in the markets right now. People are responding very emotionally to the rapidly changing dynamics. It makes sense to take a step back and objectively gauge your reaction. Before drastically changing your course, you may need to just take a deep breath and slowly assess your situation.
When you are sailing a one mile dinghy race, you react immediately to wind shifts. When you are sailing a 6 mile or 60 mile big boat race, you take a bit more time to react. Depending upon your corporate situation, you may need to respond immediately to the financial market changes, or you may need to ride it out a bit. When you react may vary, as does how you react. Sometimes big changes are needed; sometimes you just need to refocus on the basics.
Goals
To maximize value generation from marketing, it helps to have clear goals. In the current market, it may make sense to reexamine your goals. Maximizing cash flow and reducing credit requirements are probably more important for most companies than they were before. The current financial situation may influence you to accelerate or decelerate your exit strategy. Whether your goals include increasing sales, growing profit margins, or increasing short-term cash sales, they need to be defined before looking at your marketing mix.
Priorities
To get the most value out of your marketing tactics, it makes sense to prioritize them based on which ones will help you reach your goals fastest. You want to implement a strategy that has a precise focus on achieving your stated goals. If you've extended your exit strategy window, then re-branding may not be as critical. However, discounting cash sales could be an appropriate tactic for both increasing cash sales as well as increasing customers, which could be good positioning for an accelerated exit strategy.
Maintain Value
More than ever before, companies should avoid engaging in price differentiation. Price wars are an inevitable downward spiral to commoditization. Simple price discounts also devalue your offering.
In tight economic times, buyers are not looking for a low price, they are looking for a good price—value. Whether buyers spend the same or less money than they did before, they value their money more. They want that money to bring them value—a balance of quality and price.
If you are offering a lower price, you still need to maintain your value. To do that, show your customer that if you are compromising on price, they are getting a compromise—a slightly smaller/lower value offering, a longer delivery time, their second choice in color, an upfront payment instead of COD, etc.
Expand Your Approach
Lenders of all types are being forced to raise their qualification requirements for borrowers. Your mailbox may be flooded more than in the past with credit card and mortgage offers. A quick glance at the envelope may lead you to believe that you could have every card and loan* that's being sent your way.
*If you read the fine print, you'll see that the "prequalification" merely means you made the mailing list. Lenders are reaching out to a much larger audience than before to find the borrowers who can qualify at their higher standards. To sell the same number of loan products, lenders have to appeal to a much broader audience.
This works in other industries, as well. A fine furniture manufacturer who doesn't want to lower prices may need to appeal to a more affluent demographic than before and/or focus on markets that aren't dominated by professionals in the financial industry. That same manufacturer could also launch a lower-priced line to appeal to existing customers who are being forced to cut back.
Cut the Fat
In order to justify expanding your valuable marketing tactics, you may need to cut back on those tactics which aren't bringing the priority value to the table. Put your budget on a diet, but don't starve it. Eliminating marketing altogether will hurt all companies in the long run, and most in the short run. Really focus on the marketing efforts that will generate revenue. If you are a long way from a product launch, branding isn't a priority but investor presentations are. If selling through resellers is your most profitable channel, you may need to cut back on your direct to consumer tactics.
Remember Repeat and Referral
Repeat and referral customers are the least expensive to acquire—they are your most valuable. Unless your existing customer base is disappearing altogether (and I haven't seen that happen to anyone yet), make sure you include marketing tactics that keep this base coming back. Digital communities are very cost-effective and in times like these people are increasing their use. LinkedIn and Facebook have seen an increase in networking traffic recently.
Invest
Don't be afraid to spend money on marketing now. Now more than ever is the time to spend money on marketing. Companies that don't keep promoting and selling will plateau and shrink. The key is to define your goals and then to invest in your highest value-generating tactics to reach those goals.
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 What Can You Do?
For several reasons, this is a very appropriate time to bring in an outside resource:
- The strong emotional ties to your organization that you and other key players have will not be shared by a consultant. A consultant will be able to objectively assess whether or not your reaction is appropriate.
- Creating an alternative strategy can be hampered by internal people who feel ownership of a strategy that has not been fully executed, and who may feel robbed of the opportunity to show that their approach really can work. An external consultant can help justify the need to change strategies, and positive energy can help employees adjust to the change.
- Market-instability induced fear can lead to a retrenched WADITWA (we've-always-done-it-this-way) attitude that feels safe. External counsel can provide validation and confidence that change is warranted.
- Developing new strategies to respond to a new environment requires thinking out of the box, not WADITWA. An external voice can bring energy, ideas, and a different set of experiences to spark thinking in a new way.
- If you are thinking of reducing staff, outsourcing creative development and execution can be cost-effective.
Contact Vision Strategic Marketing & Communications at 410-849-8085.
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Ask the Expert
Question
I need to cut back on my marketing budget and just focus on sales, instead. This won't hurt me, will it?
Answer
Don't forget what marketing really means:
Many people think that the term "marketing" refers just to the promotion of products or services, especially advertising and branding. However, when practiced appropriately, the term has a more comprehensive meaning. Marketing can be divided into four sections, often called the "four Ps" (only one of which is promotion):
Product - The Product management aspect of marketing deals with the specifications of the actual good or service, and how it relates to the end-user's needs and wants.
Pricing - This refers to the process of setting a price for a product, including discounts.
Promotion - This includes advertising, sales promotion, publicity, and personal selling, and refers to the various methods of promoting the product, brand, or company.
Place or distribution refers to how the product gets to the customer; for example, point of sale placement or retailing.
Submit your questions to the editor: molly@visionsmc.com
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