March 31st came and went with less of a drama than forecasted. Yes politicians and the media took centre stage while the business world rolled its eyes to an extent. But although it was happening I don’t think that the business community panicked as much as I had originally thought. In fact I could almost compare it to the millennium bug fiasco. The UK didn’t drop off the end of the world, which is still round by the way. Don’t let Sky News tell you otherwise.
What’s different the second time around?
Change of PM? Or with the current rhetoric does it feel more real than the first time around? There certainly feels like a more cautious tone is being applied around the business sector. Especially now we are getting closer to the October deadline. I’m not going to go into a political rant or express my feelings on the state of our media. But I’m not sure that any of the parties across the political spectrum are helping the local business and export import sectors in the UK at this present time. There is simply too much uncertainty around.
Where does this leave you and your marketing plan?
There are two ways to go, batten down the hatches or go bold for the ‘B’ word. In the last financial recession, the businesses who didn’t reduce their marketing achieved a better result in the end, whilst the ones who buried their heads in the sand faltered. It’s a brave thing to do to go bold but I think that it is the right way. If we create a culture of fear it will manifest into another difficult time for UK companies.
I know you think that I would say that being bold is the way to go, being in the marketing industry. As traditionally when sales don’t come through the door, marketing budgets fly out of the window. But do you dare to be brave?
What should you do?
Don’t panic, the assumption that people cut their spend during times of uncertainty isn’t true. Consumer spending simply grows slower than normal and fails to keep up with inflation.
Cut the right costs, starting with operational costs first, not your marketing budget. Excess monthly costs and spare capacity is the best way to go first. Companies who lower the quality of their service or product tend to underperform during this difficult sales period.
Reducing ad spend is a quick fix but has the biggest long term negative impact. Research from the last recession in the late 00’s has shown that income fell by an additional 23-30 percent over the following two years after the dip as a result of advert culling. This in turn puts your brand and company at risk. Without advertising, your pressure to cut prices becomes harder to resist. Small companies fall into this trap more than the established larger businesses who have seen previous harder times.
B could be an opportunity
As much as it could be a threat, there are some interesting examples of companies who benefitted hugely from the last recession, by picking up the work and services the weaker companies left behind. Because media advertising costs drop during harder times you get a better ROI. That combo of lower ad spend with greater ROI and weaker competition means a higher and more concentrated market share.
Promotions are not the solution, this can create a negative impact on profit margins. Better to sell less at a higher margin than lots at none.
Customer service is the key to your company’s strength over the next six months. That emotional connection is a vital bond in hard times and a bonus after. Emotionally led advertising campaigns tend to have the bigger impact against offers that are price point related.
Crystal ball, I wish
I’m not going to say that we are heading for a recession. The current level of uncertainty without a clear end game is going to create some weakness in UK spending whilst things settle down. Just leave the running around like a headless chicken to the ‘experts’ in Whitehall.
Research stats courtesy of PIMS® Profit Impact of Market Strategy®