April 2001

If Business Gets Any Worse... We Should Probably Start Advertising

BY NADJI TEHRANI

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:

1. If you don't market, you don't exist.
2. Marketing is not a part-time job.
3. 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 it"?

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 stated:
"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 stated:

"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 & Lybrand:

"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 Media.

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:

1. "Maintaining or increasing advertising budget levels during economic downturns may be necessary in terms of protecting market position vis--vis forward looking competitors."
2. "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 on."
3. "Advertising through both boom and down times sustains the necessary brand recognition."
4. "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."
   
   
5. In addition, The Strategic Planning Institute states:
   
   "Economic downturns reward the aggressive advertiser and penalize the timid one."

Summary
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.

Sincerely,

Nadji Tehrani
Executive Group Publisher
Editor-in-Chief

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Congratulations To The 2001 Top 50 Inbound Teleservices Companies

I would like to take this opportunity to extend our sincere appreciation on behalf of the entire contact center industry as well as the entire staff of Technology Marketing Corporation, publisher of Customer Inter@ction Solutions magazine, to the 2001 winners of our industrys coveted Top 50 awards.

Especially impressive is the growth in the volume of inbound calls being handled by the companies represented in this years Inbound Top 50. This continued growth, the cumulative net minutes gained were nearly 28 percent higher than those of last year (which were up 25 percent over the 1999 totals), has been spurred on by the realization of companies of the importance of customer relationship management and the driving need for customer retention, sales and follow-up inquiries generated by e-commerce and continued increases in the number of help desk/technical support calls.

Those of us who have followed the industry since its inception in the early 1980s and know the contact center industry inside and out, also know how difficult it is to become a member of this elite and prestigious group of companies. We know how difficult it is to hire, train and retrain multitudes of people and help them develop great careers, and also how difficult it is to deal with many demanding customers in a highly competitive environment. Earning a Top 50 award year after year is indeed one of the most difficult accomplishments, if not the most difficult, within the teleservices area. You bring respect to our industry through your excellent quality, while generating job security for the thousands of Americans who work for the companies that benefit from the revenues you generate when they outsource their telesales and teleservices functions to you. We salute you for a job well done. We stand in awe of your well-deserved growth. It is a pleasure to work with you on a daily basis.

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