By Caroline Airton
As margins are squeezed and sales begin to dip, the temptation for many bosses is to cut costs and slim down what they wrongly perceive as ‘non-essential’ spending on marketing.
Time and again I hear businesses justifying falling sales as the reason for downsizing their marketing investment — without challenging whether those falling sales will plummet still further if marketing budgets are compromised.
When the pressure is on, internal decision makers thrash out which areas of spending are essential and which are disposable. Short-term choices amounting to false economy often take precedence over long-term investment which can pay dividends.
Research on market positioning and driving and sustaining a robust marketing strategy is crucial to boost your brand awareness and desirability in order to attract new customers. To ensure maximum effectiveness, the process must comprise strong evaluation criteria with a toolkit of key performance indicators.
Tough times undoubtedly mean tough choices. In a fiercely competitive marketplace, you have two clear options. To either compete directly on price or reduce profit margins, or to add value in areas which are not price-sensitive to stand head and shoulders above your competitors.
These areas can include surpassing customer expectations through excellent service or through elements such as packaging and point of sale material — all of which can make the difference between good or great services and products.
Yet when faced with a potential downturn, quality can often be sacrificed for bare-bone research and rushed creative processes.
Such lack of foresight is one that frustrates those of us who have spent a career forging and nurturing brands. Astute consumers are also aware that it’s far harder to justify brand loyalty if your product they bought six months ago is now being sold at a significant discount.
So slashing your prices in the fierce battle to compete for every last customer and win on short-term profits could lose you the long-term endgame of re-establishing your brand and its values in the market space it occupied before.
The lessons of continued investment have been highlighted time and again. We recall the dark economic days of the early 1990’s when brands like Adidas and Nike were upping their marketing spend to unprecedented levels, while their competitors fought over “bargain basement” space. In the short term Adidas did see a fall in sales, but the long term value of their brand was enhanced and, as economic prosperity returned, consumers likewise returned to aspirational, higher value products.
It’s a proven fact that customers will pay more for a quality product; the argument is merely about how much premium can be commanded. However, if your brand is associated with poor-quality, consumers with money to spend will shun your products for better-positioned competitors.
It is therefore possible for firms to protect their brands, while ensuring sales do not fall catastrophically in the short term. The key issue is to balance current commercial pressures with the long term stability and brand value.
One way to achieve this is to incentivise rather than discount. Offering customers additional reasons to buy, rather than simply making low-price the only reason to purchase, can boost your sales without diminishing quality.
This tactic also allows you the flexibility to adjust your offering when the market begins to grow, without undermining your brand positioning.
Digital media is one area which many businesses are adopting to add-value to their brand, particularly by increasing the ways they can communicate with their customers. Firms like Wagamama have found that, by investing in more interactive communication channels, they can increase customer loyalty and sales without altering their core product, or squeezing margins.
Businesses that spend money intelligently make more profit. Investing in strategic, focused marketing, even in turbulent times, makes it possible to stay one step ahead of your competitors and leverage yourself to an even stronger position when market conditions improve.
Caroline Airton is Account Director of ICM Creative, a marketing and design consultancy based in Leeds, West Yorkshire – www.icmcreative.co.uk