Alf's Articles

Economy To Put Squeeze On Marketing In '03

by Alf Nucifora

2002 has not been a good year for the folks in marketing. The recession has definitely taken its toll. Everybody is feeling it. No sector is immune. Companies have either stopped spending or delayed spending decisions. They've slashed budgets and have forced every corporate function, particularly marketing, to do more with less in order to fight margin pressure.

On the consumer front, confidence is unquestionably on trial. The cause can be traced to a number of clearly identifiable factors…high unemployment and job attrition rates (particularly for the higher income earning brackets), a volatile, irrationally performing stock market, thinning 401(k) plans (October is statement-shock month), a predicted bust for the historically peak Christmas retail season, continued suffering in travel, tourism and hospitality, more corporate sleaze headlines and indictments, the ultimate long-term negative impact of aggressive auto discounting, doubt as to whether the housing market can sustain its current pace and, of course, the effect of the inevitable war in Iraq.

Most business and marketing pundits see an improvement in '03. Business writers point to the good news of increasing productivity rates coupled with the maintenance of low interest rates. This recipe, they say, must point to an upturn in early '03. A recent survey from the California-based Patrick Marketing Group states, "2002 seems to have been a year for sitting on the sidelines with respect to key marketing strategies and tactics. Many people hunkered down to survive through the sluggish economy…The outlook on 2003 appears to be completely different…almost diametrically opposed. Two-and-a-half times as many people anticipate spending increases (49%) as those who expect further cutbacks (versus 19%)."

This writer is not as optimistic. My advice…don't buy that Mercedes yet. '03 will be another year of belt-tightening and business angst. Keep a tight reign on expenses and work like a dervish at business development and maintaining current customer loyalty. Assume that the turnaround will not be felt any time soon. In the meantime, use '03 as a building year…an opportunity to get the house in order and to plow the fields and sow the seed for a good harvest in '04.

THE OUTLOOK FOR MARKETING

Interviews with a number of prominent and experienced marketers have identified a number of trends and influencing factors that will have an inevitable impact upon the marketing universe in the next twelve months.

Less Money: Marketing budgets will not grow dramatically, if at all, in '03. This means marketers must do more with less. Ken Bernhardt, Regents' Professor of Marketing at Georgia State University, warns that marketers will be forced to experiment…trying new media options and actively seeking the next "big idea" that can boost sales and grow the business. Says Bernhardt, "Smart marketers will push innovation and experiment with new products."

Show ROI: In the past, management never seriously questioned the value of spent marketing dollars. Next year those same dollars will come under extreme scrutiny. "Metrics" and "measurement" will be the mantras. Every marketing line item will be questioned and the constant refrain will be, "Where do I cut?" Notes the Patrick Report, "Only 23% of surveyed companies report that their CEOs believe that marketing is measurable and is being used to drive near-term sales."

CMO Fear: Marketing management will come under increasing pressure to defend itself…its strategies, its spending and its results. The issue is accountability, a benchmark that most of the marketing ranks have conveniently avoided in the rich and rewarding decades of the '80's and '90's.

Retention vs. Acquisition: If the existing customer is potentially five times more profitable than the new customer, it makes sense to focus the energy on retaining and exploiting the loyal base, cross-selling and up-selling with much vigor. Customer churn will become an anathema, as it should. To that point, notes Bernhardt, "There will be greater interest in customer loyalty than in customer satisfaction." For the strategically-driven marketer, this means segmenting the current customer base and focusing tight dollars on those existing targets that can deliver the highest margin now and in the future.

Thinking Long Term: There will be a growing emphasis on long-term branding rather than short-term product movement (via discounting and promotion). Those narcotics will still be ingested by the marketing thrill seekers who live from high to high (think auto companies and 0% financing). But ultimately, the strategy "of forward buying sales" must result in a "crash and burn" scenario. That's why the more astute marketers are weaning themselves away from the cheap thrill toward a more sustainable long term branding strategy.

Interpreting Data: At long last, there will be more serious interest in translating marketing data into information and meaning. This is where CRM gets its day in court. Says Darrel Hulsey, a business consultant with University of Georgia's Business Outreach Services Division, "We're beginning to see the integration of technology with marketing, specifically in e-commerce and CRM. Small businesses are also developing sophisticated feedback systems. They want to know how their customers feel about the product or service."

More Research: In times of hardship and indecision, we tend to be more aggressive in seeking the reasons and the answers. Ditto for marketing. Expect more investment in research…analyzing new product opportunities, investigating growth strategies…anything that will help better understand the consumer's buying mood and behavior.

Uncertainty: Says Bernhardt, "People can't deal with uncertainty. They postpone the postponable because they don't know what to do." That's certainly the case with marketing decisions. Expect delay followed by delay, resulting in unnaturally shortened decision cycles. It may not be fair, rational or right but neither is most management behavior in periods of uncertainty or stress.