|In June 1996, my Publisher's
Outlook was entitled, "The Sad State Of Marketing In Corporate
America." Although it's been nearly five years since I wrote that
article, the situation has not changed. To appreciate the contents of this
current editorial, please first read "The
Sad State Of Marketing In Corporate America."
As a student of marketing for much of my life, I have always been
amazed that so many marketing managers, directors and executives just
don't follow the basic principles of the discipline, which is unfortunate
for both the companies they serve and their own personal careers.
As I have stated often, marketing is the lifeblood of every
corporation. If I recall correctly, a leading marketing guru once said:
"Companies exist for two reasons, marketing and innovation." As
strange as this statement may seem (to the people who have no clue about
marketing), marketing is, in fact, even more important to the survival and
prosperity of any company than stated above. In fact, in my editorials
since 1982, I have made the following original statements about marketing:
- If you don't market, you don't exist.
- Marketing is not a part-time job.
- Unlike the common belief of most high-tech companies, marketing
should not be regarded as a necessary evil, but rather it should
really be the other way around! No company can go very far or even
exist without a well-prepared, strategically sound and realistic
(cost-effective) marketing program.
I have frequently stated that the lackadaisical approach of high-tech
companies to marketing accounts for their high failure rate, a rate that
is, in fact, higher than any other sector of business. As I indicated in
my last editorial
(March 2001), the unfortunate mistakes of Dr. Alan Greenspan in raising
interest rates have seriously aggravated the situation. In fact, this
ill-advised action by Dr. Greenspan caused the loss of not only trillions
of dollars for investors, corporations, individuals, retirement funds,
etc., but also had an even worse effect on capital. Such capital is the
lifeblood of many pioneering and innovative companies. The Federal Reserve
Board Chairman's actions literally destroyed any chance of success for
many start-up companies, which undoubtedly could have been the future
Microsofts, Cisco Systems, AOLs, Sun Microsystems and Oracles of tomorrow!
I really did not mean to add salt to the wound following my March 2001
editorial entitled, " Q: How To Screw Up A Perfectly Good Economy. A:
Ask Alan Greenspan," but the fact is that this ill-advised, totally
unnecessary, irrational behavior of Alan Greenspan created a powerful
downturn in the economy, the effects of which are seen in the marketplace
today. I recently learned that one of the leading and outstanding
high-tech companies mentioned above has lost in excess of one hundred
billion dollars in market capitalization!!! And that is just one company's
loss. I am sure if you add up losses by other companies, individuals,
families, blue- and white-collar investors worldwide, the amount would be
staggeringly higher than several trillion dollars. And just think, all
that got started by the unnecessary rise in interest rates to supposedly
eliminate completely nonexistent inflation. Whatever happened to the
conventional wisdom that states, "If it's not broken, don't fix
The intention here is not to continue to bash Alan Greenspan, but to
highlight what may be a less-obvious problem to which his actions have
contributed, namely the slowing economy has prompted many corporate
marketing managers to reduce, and in many cases, eliminate all
advertising, marketing and promotional programs!
The Case For More Aggressive Advertising In A Slowing Economy
The worst thing any advertising executive can do is to stop advertising in
a slowing economy. Here is what an article in the Harvard Business Review
"Advertising in an economic downturn should be regarded NOT as a
drain on profits, but as a contributor to profits."
It is a known fact that all sales begin with sales leads. The majority
of sales leads come from effective and regular advertising. In short,
there can be no new sales without new sales leads. As the economy slows,
naturally sales and revenues of most, if not all, companies decrease, and
about the only way to compensate for that is to bring in new business. And
new business comes from new sales leads generated from continuous and
effective advertising. If anyone has any problem understanding this basic
and elementary fact, that person should not be in business.
Advertising Is Vital To Reverse The Loss Of Business
During a good economy, one might lose about 30 to 50 percent of its
business due to natural attrition. In a slowing economy, this number is
more like 50 to 75 percent of business lost due to natural attrition. It
is vital to replace this attrition with new business, meaning new dollars
coming from new sales leads and continuous advertising for new products
and services offered by any company. It is really just as simple as that.
A Review Of Positioning Laws
One of the most informative articles I ever read about positioning stated
that the great marketing battles are not fought in the business
environment, but rather in the minds of the consumers. After all, the
ultimate essence of advertising, marketing, PR, etc., is to influence
consumers to prefer and purchase the brand of products or services that
are being advertised. Therefore, the most important byproduct of
advertising, positioning and marketing should be to win over the mind
share of consumers or, in the case of business-to-business transactions,
the mind share of end users. An article in San Diego Executive magazine
"If during an economic downturn you maintain a strong
advertising presence while your competitor cuts his budget, you will
automatically increase your "Share of Mind."
In a related article, ABM (American Business Media) stated the need for
advertising in a different way:
"When times are good, you should advertise; when times are bad,
you must advertise."
Here is another comment regarding this subject matter from Coopers
"During an economic downturn, a strong advertising/marketing
effort enables a firm to solidify its customer base, take business away
from less aggressive competitors, and position itself for future growth
during the recovery."
You Can't Argue With Success
"History has proven companies that maintain or increase their
advertising investments in periods of economic downturns increase their
sales and share of market, both during and after the downturn."
Source: American Business
The Best Way To Increase Share Of Market
As indicated above, most marketing managers and executives tend to do the
wrong thing during an economic slowdown. In other words, instead of
aggressively advertising and marketing, they do just the reverse and that
usually spells disaster for their companies. In fairness, however, one
cannot always blame the marketing or advertising managers of companies for
doing absolutely the wrong thing by cutting the advertising and marketing
budget of a company. The necessity for aggressive advertising in a slowing
economy must be understood by everyone in any company, particularly by the
CEO, CFO, as well as sales, marketing and advertising senior management.
While the marketing manager might remind the CEO that the company simply
cannot stop advertising in these periods, he or she is often overruled by
someone else who has no clue about the vitally important necessity of
advertising in a slowing economy.
On the other hand, this unfortunate elimination of advertising budgets
by the majority of companies can have a positive effect in terms of market
share swing. In other words, the ill-advised decision by 80 to 90 percent
of companies not to advertise creates a tremendous opportunity for savvy
companies to redouble their advertising efforts during a slowing economy,
thereby significantly increasing their market share while their
competition is napping. History is full of examples of companies that lost
their market leadership due to lack of marketing during a slowing economy.
Marketing Is Not A Part-Time Job
Everyone in the entire organization must understand this vitally
important, basic principle of marketing, and unless everyone supports it,
the company will end up going nowhere. It is not enough to periodically
advertise when the CFO tells you there is money available to advertise. It
is not only imperative to market and advertise on a regular basis, but
your advertisement must also be powerful and highly effective. Please see
my August 2000 editorial entitled, "The
Unbeatable Formula: Innovative Marketing & CIM". In that
editorial, I reviewed extensively what makes an ad memorable and highly
effective. Often, you need to go against the grain. If your competition is
using Method A for advertising, you definitely want to use Method B, which
is totally different from Method A, to thereby make your products and
services stand out.
Business-to-business ads, particularly in the case of niche-type
businesses, that are highly focused and placed in targeted magazines are
extremely effective, provided they are well-prepared and response driven.
As you know, I have covered most of this matter in detail in previous
editorials and I urge you to reference them as parallel reading.
Getting back to the need for advertising in a slowing economy, here are
some more excerpts from American Business Media (ABM) on this topic:
- "Maintaining or increasing advertising budget levels during
economic downturns may be necessary in terms of protecting market
position vis--vis forward looking competitors."
- "If a company fails to maintain its 'Share of Mind' during an
economic downturn, current and future sales are jeopardized.
Maintaining 'Share of Mind' costs much less than rebuilding it later
- "Advertising through both boom and down times sustains the
necessary brand recognition."
- "Maintaining a company's advertising during an economic
downturn will give the image of corporate stability within a chaotic
business environment, and give the advertiser the chance to dominate
the advertising media."
- In addition, The Strategic Planning Institute states:
"Economic downturns reward the aggressive advertiser and penalize
the timid one."
From all of the above, one should conclude that as the economy slows,
advertising not only must continue, but also must increase because this is
the time when market share changes hands. Second, it is the job of
marketing, sales and advertising managers to inform senior management that
it is vital not to cut the advertising budgets during the slowing economy
and, in fact, the budgets should be doubled to be effective and to
maintain and indeed increase market share.
As always, I welcome your comments.
Executive Group Publisher
To April 2001 Table Of Contents ]