Time For Cuts?
By Ellen Fruchtman, President
I know. We’re not talking about it. We’re in one. We’re not in one. I’m not sure what you believe, but I have yet to find a person who doesn’t feel the pinch. We can beat around the bush and hear any explanation, but the “R” word is looming and we need to ask the ever-so-important marketing question:
Should you cut back on your advertising?
The greatest answer I ever read that someone wiser than me said was this:
“When times are good you should advertise. When times are bad you must advertise.”
In our over 41 years in business, we’ve weathered many a downturn. Even our own. But, the statement above couldn’t be truer. And, more importantly, there’s research to back that up. In 2009, after our last significant downturn, Gerald J. Tellis, from the Marshall School of Business, in A Critical Review and Synthesis of Research on Advertising in a Recession, noted the strategy employed by any company during a recession has far-reaching effects. Companies, he goes on to say, that advertise less during an economic downturn will not only see fewer sales during the recession but also after the economy recovers. On the other hand, those that spend are more likely to increase short and long-term sales.
In 2008, we had a client who wanted to be the behemoth monster in his city. While his competitors were cutting back, he not only remained in the game, he spent significantly more to own the game. And that he did. In the subsequent years to follow, several of his competitors went out of business. He became the largest retailer in his city. In marketing terms, he grew his “share of voice”. Overall, an increase in “share of voice” will typically increase your overall share of your market.
We are in the business of selling a product to a consumer who wants it. Marketing is the way any consumer hears about your brand. It stands to reason that if you cut back your marketing, you are providing less information to the very person who is most likely to walk in your door or go online.
The type of marketing you deploy is also crucial to your success. As more and more people are online, your strategy should be to boost your online presence. We saw some pull-back by many brands during 2020 and Covid. This provided enormous opportunities for local retailers who remained in the game. Digital engagement and clicks to websites went way up, and costs per click decreased dramatically. We have the numbers to prove it.
Let’s also remember that Covid ushered in the work-at-home model and boosted it to new levels that have remained. More people than ever are working from home and don’t necessarily have a boss looking over their shoulder. Likewise, people are shopping and browsing more and more online. People are video streaming in their homes, actively engaging on their social media platforms, watching more TV and news, and listening more to audio streaming (or local) channels. A good marketer knows how to target your buyer where and how they’re engaging with media. You need to be there.
This is also a time to look at your advertising messages. If you are not in the business of constantly discounting (and we hope you aren’t), it’s critical to point out the value of purchasing from your store. In far more recent news, Amazon Prime Day, which was held on July 12 and 13, broke records and was the biggest event in its history. 300 million items were sold online; their selling partners generated over $3 billion (a 60% increase over last year) Why? Consumers saved $1.7 billion during that one event. Consumers did spend more on their transactions than the previous year. Target and Walmart (who ran similar promotions during the same time), stole a little of their sales. What did happen was that their retail brick-and-mortar traffic increased by approximately 8.5%. Sales overall were high, but one area that was not (and dipped) was jewelry. According to Bernard Arnault, CEO of LVMH, “These customers are becoming increasingly selective and show a priority for a number of brands that offer more”.
You may not discount, but you can market special promotions. Have a rewards program? Offer additional points more often. Have exceptional services like lifetime warranties, free shipping, and a flexible return policy? Let people know. With younger buyers being the most price-sensitive, consider including everything from your lowest price-point in your marketing to interest-free financing. Provide offers on wedding day jewelry and wedding bands when engagement ring customers come back to pick up the ring. If you have never deployed a holiday gift card, do consider it this season. And also consider expanding your customer list.
While the economy ebbs and flows, you need to adapt and respond. Sure, hearing what we hear every day is disconcerting. It might scare you into cutting back on advertising. But this is the worst thing you can do. Maintaining or even expanding what you do strategically can have a profound effect on your business.
I started with a quote and so I will end with one. Walmart founder Sam Walton was asked, “What do you think about a recession?” He responded with this: “I thought about it and decided not to participate.”
Looking to increase sales? Contact email@example.com and we will discuss a strategy that is right for you.