The economics of marketing - shrink it at your peril

There's loads of research saying if you cut your marketing budget during tough economic times you won't survive with the strength you could if you just towed the line. And yet, there's more businesses cutting their marketing budgets than there are businesses getting smarter about how they spend their money.

I've had the pleasure of dashing about presenting Marketing Bootcamp for Small Business - Your recession survival toolkit to a number of organizations over the last month. The session discusses the importance of not cutting your marketing budget and shares important information about how to get the most bang for your buck. I've met some pretty terrific small business people who are suffering cutbacks and, in most cases, they've felt they have no choice but to cut their marketing budget.

The key thing to remember: If you cut your marketing budget, you are effectively lowering the amount you talk to your customer. At the very least, you are lessening the quality of the conversation. And if you aren't talking to them, someone else is.

This is why companies with their marketing budget intact, even during recessionary times, grow larger and stronger while other businesses close or panic. It's all about continuing the conversation.

Small businesses waste an extraordinary amount of money in their marketing. And they don't understand that marketing is actually a revenue stream - not an expense line (accountants will argue this, but it's simply true that marketing is the top of your sales funnel - without it there's no support for your sales force and no mechanism for relationship development with prospective customers). For many small businesses, marketing is simply a necessary evil that is the first thing to go when money is short.

In my book, Muddled, meager and messy - Marketing performance repair manual for small business there's information about how to make better use of the money you have. In cases where you get smarter, you can actually pare back your spend because you're getting more results.

The media has done a bang-up job of putting recession fear into every business person's heart. Take that fear and turn it into smarter business. Every marketing tactic should be able to be defined by the relationship it builds with your customers. If there's no relationship definition, you should reconsider the tactic.

Bottom line: If you have to cut your marketing budget you'd better get smarter about using the money you have. Heck, even if you don't have to cut your marketing budget, you should get smarter because customers are going to become more discriminating in their purchases.

Don't we love a disaster

With the year drawing to a close, I thought I would look back at the stats for my blogs over the year. The blog about the disasters of Wendy's and Burger King's marketing was, by far, the most popular. And popular around the world.

Most of the readers found the blog through a Google search. Have Wendy's and Burger King become the equivalent of rubbernecking a car crash? As North Americans, we have a morbid fascination with disasters and these two fast-food joints are definitely the prize winners for disastrous branding and marketing.

I re-read the blog to see if there had been any changes to the situation since writing about them in January. To my surprise, the brand-scarring I mentioned in the blog had been eliminated. The evil papier mache King head seems to be gone and the idiots in red braids seem to also have left the building. And thank goodness for it.

Wendy's brand has become more stable and likable again. Burger King is still a mangled mess, but at least they aren't scaring people anymore. (Well, they do scare me but that's a different thing. What scares me is that someone is out there making money off this mess and pretending they know something about marketing)

Needless to say, ill-conceived marketing ploys will be more painful for companies during the recession. Lack of consistency and follow-up will affect business bottom-line in a more pronounced fashion. With a tighter hold on their wallets, consumers and businesses will be making more thoughtful decisions about where they spend their money. Emotions induced by marketing messages will have more power to create a strong customer base.

Tight credit and closely held wallets won't make people stop using their emotions when they make buying decisions. They'll just get better at rationalizing the purchases. So mind your marketing and how it affects your customer.

Best wishes to all for a prosperous 2009.

Smart recession survival

Small business owners can see recession two ways. One where they sit in fear and one where they take advantage and stay ahead of the pack.

I suppose it's a natural survival tactic to hold everything close, keep it safe - particularly your money. But if you let fear govern your business decisions, you simply may not survive.

Recessionary times are when the smart survive and the unique get noticed.

Smart companies recognize marketing as a revenue generator, not a cost centre. They don't immediately cut their marketing budget. They get smarter about how the money is used. Mass communication is replaced with targeted communication. Interaction with the customer is increased so they stay front-of-mind.

Unless you are in a luxury market, your customers still need or want your products. Make sure your products and services are priced to reflect market tolerance. Surviving recession isn't about lining your pockets, it's about survival.

Get creative about how you reach your customers. Surprise them with where they find you and what you are telling them. Small business messages have historically been very ego-centric. You have to become customer-centric to make it through tough times (actually you should be customer-centric all the time, but it's even more important now). Standard tactics won't be enough.

And tighten up your marketing spend. That doesn't mean cut the budget, it means eliminate the chaff and be efficient with the money you have. If a tactic isn't bringing a return, then change the tactic. But remember when you are measuring the success of your tactics that it isn't just about the immediate return. It's about developing a relationship with your customer. If you're getting inquiries or website hits but no actual buying, then your tactic has done its job. Marketing's purpose is to bring customers to you, it is the job of the sales team to actually make the sale.

The best weapon you have in recession is a good data base of your customers. This will help you deliver personalized attention at the marketing level. You can gather a good data base through a contest with a small survey as part of the entry form. The contest creates traffic, either to your website or your place of business, and while your customers have a chance to win so do you with the information you gather. Variable data printing isn't only for big companies these days. It's affordable to businesses of all sizes.

Develop a referral program. This is common place in the financial services industry but is functional for all types of business. Your best advertising is word-of-mouth (whether it's traditional word-of-mouth or through social media) and if you can get your customers talking, you're a step ahead. And if your referral program is strong enough, they'll definitely start talking.

Above all, don't try to manage your marketing on your own. You're in the business you're in because that's what you are good at. Don't try to be good at everything - no one can manage that. Call in the specialists to really get your marketing budget working for you. But make sure they are trained and experienced. Just owning some desktop publishing software doesn't make someone a marketing specialist.

Small businesses can be agile. That's a great advantage over big business. Be ready to change at a moment's notice - whether it's your product list, your audience base or marketing tactics.

Recession means get smarter

The economic news throughout the world has recently become a big threat to small business. Lending has tightened, customers are holding their funds close to their chest. For many businesses, the next order of business is to cut costs. AIC, a mutual fund company cut their staff by 20% this week. In the article it is mentioned that this isn't as big a deal as it appears because most of the staff cuts were to IT and marketing.

And there's the rub. So often, the first that gets cut in a recession is the marketing team and the marketing budget. And without either of these, how do you get your message out?

Recessionary times are about being smarter with your money. Quite frankly, in my book being smart all the time makes the most sense but so many business people and even in-house marketing teams take the money for granted in the good times.

So how do you use your money wisely?

First, get to really know your audience. Mass marketing isn't economical if you sell a niche product or your audience represents a specific market. Find ways to fine-tune your delivery mechanisms. Stop talking to the people who will never be your customer. To use an example from last week's blog, if you are selling something that costs $30,000 stop talking to neighbourhoods with high unemployment or low incomes. You may have to get out of your office and actually sell your message in person.

Second, stop buying message delivery systems just because they seem inexpensive. If you spend $125 to reach no one who responds it is actually more expensive than spending $250 to reach those who will. Of course, you can only spend what you can afford, but if you resist the urge to spend that $125 that seems so inexpensive you can add that to next month's budget and actually reach people who care.

Third, and while I've come to hate this expression, think outside of the box. Be creative in how you reach your audience and how you spend your money. For some US readers, this could mean thinking about getting a Canadian marketing team to craft your messages. The difference between the Canadian and US dollar right now means you get more for your money. But it doesn't mean to resort to your nephew to do your creative development just because he happens to have a design program on his computer.

The companies that stay in the customers' minds during a recession are the ones who survive and grow more quickly after the recession ends. Which it will. It always does.