Marketing and marketing ROI in a Recession

Everyone seems to be writing on this topic so I thought I would also chime in.  Times aren’t great for marketers, unless you have a couple of key arrows in your quivers   It’s not easy to cope, when it seems like nothing is working, sales are down 30 to 40% and the company is threatening payroll cuts.  And the CFO and CEO are saying cut your advertising budgets by 30% or else.

As we put our plans in place to survive (and thrive) in this market, what we’ve seen from our clients is that consumers seem to be trading down.  Instead of purchasing extravagant or luxury items they are holding off until they have confidence about the future.  They are looking for the bare minimum, the absolute necessities and where they can get these at the best price.  Discount redemptions are going up. The value placed on a premium brand is falling.  Instead of shopping in their preferred channel, they are shopping in a channel known for low cost.  WalMart comes to mind.  WalMart reports they are doing very well across most categories, although this may also be due to lower gas prices. (February Retail Sales Stronger Than Expected, by Sarah Mahoney in MediaPost, http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=101585)  Our own anecdotal evidence shows that other value brands and offerings also seem to be doing well.

Consumer behavior and choice

If this is the case, what has changed in consumer behavior and how can we potentially change our thinking to take advantage of this dynamic.  Here are a couple of thoughts and questions: 

1. Are shoppers simply trading down in their channel selection but purchasing premium brands in a value channel (as WalMart’s success might allude to).  Do marketers need to focus solely on lower price or will shoppers trade down in their channel selection and trade up once in the door?  Do we need to maintain our premium price in the value channel, or do we need to cut prices across the board?
2. If consumers have temporarily exited the category, how can marketers retrieve them in order to re-grow the category and then drive preference for their brands? 
3. Once consumers are shopping in the category how have consumer preferences changed and do brands need to change their messaging to take advantage of it.  Once consumers have chosen to purchase in a specific category consumers make choices based on a combination of their preferences for specific functional and emotional attributes.  For example, has the emotional preference for the ‘good value for the money’ brand attribute changed, or has the disutility of price changed?

I’m sure there are other questions we could start to ask ourselves and our consumers in order to determine how consumer behavior has changed and how we can potentially take advantage of these changes.

I would love to hear what you’re experiencing as you try and survive and thrive in the uncertain economy. 

I also have a question for you and that is, how do you see your marketing investments changing over the next two quarters (Q209 and Q309)?  Will spending be made to gain share in a down market, or will the finance team win and marketing will be cut to maintain margins?

I look forward to your views.