The American economy has been cooling off for months, and went into a downright tailspin when terrorists attacked the country on Sept. 11. Executives are cutting people, closing operations and slashing marketing expenditures in an attempt to "right size" their companies should customer demand weaken further.

But at some point businesses' only hope for a turnaround will be to take marketing out of hibernation. Marketing is the only business function that creates and retains customers. Not finance. Not manufacturing. Not IT. If a company doesn't offer products and services that customers will buy, no amount of financial or operational wizardry will help.

Some categories, like travel, will be hard hit regardless of what actions—even marketing actions—companies take. Yet even in these categories, marketing savvy can at least help soften the blow to the bottom line.

For example, a solid combination of advertising, incentives, and rewards to loyal customers on the part of airlines will help retain current customers in the short-term. Meanwhile a concerted effort on the part of airlines and local and national government agencies around the world to deliver on the service issue of primary importance to current and potential air travelers—security—will help rebuild confidence and sales in the longer term. According to many recent airline travelers, airport security is not as tight as they would like to see. Indeed at many airports, including Boston's Logan, it's business as usual.

The majority of business categories, however, will remain viable. Those companies adept at sleuthing for emerging or unfulfilled customer needs will succeed. They have the added advantage of less intense competition, more leverage in media buying negotiating, and an opportunity to pounce on competitors' weaknesses or just plain old inertia.

A look back to successful new companies and products introduced during our last recession in the early 1990s shows that marketing-driven opportunities always exist, even in difficult economic times.

Harley Davidson's legendary Fat Boy motorcycle, Jack Daniel's Country Cocktails, the Bose Wave Radio, the Gillette for Women shaving system and the Accura NSX all emerged in the early 1990s. As did Saturn and Dell.

Battered by the recession and increasingly stiff competition from Japanese Rivals, General Motors launched its $5 billion dollar Saturn project, revolutionizing the concept of automotive customer service in the U.S. Its "no dicker" pricing strategy, combined with a reputation for quality and service, paid off. In 1991, it first full year, Saturn sold more cars per dealer than any other automaker, an honor held by Honda the previous two years.

At about the same time, Michael Dell showed on the computer scene with a simple yet superior insight of dealing with the consumer directly. Despite a discouraging economy, Dell set about to take on the likes of the behemoths IBM and Compaq, as well as the country's two largest computer distributors.

Dell did more than just cut out the middleman to decrease prices. By constantly talking to its customers over toll-free telephone lines—taking orders, fixing problems, answering questions—Dell was able to find out their likes and dislikes, their wants and desires. This marketing intelligence allowed Dell to devise countless improvements in its services and product features, growing its business and wreaking havoc on the computer establishment.

Amidst the economic chill, many executives will put marketing into hibernation. However, a few brilliant ones will take a counterintuitive approach and prosper.

Many, many companies are dropping their prices in an attempt to jump start sales. Sadly, the assumption that lowering prices will motivate people to buy may miss the mark.

While management intuition suggests that most consumer buyers and business-to-business decision makers are price sensitive, our research, shows that price is the primary consideration for only 15 to 35 percent of buyers in most product categories. Even during a recession, price may become a more important consideration, but not necessarily—not even customarily—the most important consideration. The majority of buyers are simply not as obsessed with price as many marketers seem to be.

Many of these companies have dropped price or offered another price-related incentive, such as a cash rebate, in the name of "value." But here's something for companies to consider: the price of a product or service is but one component of it's perceived "value"—what you get for what you pay. Quality (the service delivery, the service environment, the physical product) and convenience (location, ease of use, availability) are also components. What drives "value" differs from category to category, industry to industry. The majority of buyers in one category, say, facial tissue, may consider price as the most important influence on their perception of the value of a product or service, but in another, say, hotels, convenience may drive value.

Furthermore, value is but one influence on the purchase decision; brand, the relationship, and inertia also drive the decision. The influence of value, the brand, the relationship, and inertia on the purchase decision also differs from category to category, industry to industry. The majority of buyers of airline tickets may consider relationships (in this case, loyalty programs) as the most important influence on their purchase decision, but when it comes to selecting a grocery store, brand may drive the decision.

Our point is that what will drive the purchase decision depends and companies shouldn't just intuitively assume value is the main influence, or that price drives the perception of value in a category. Some companies are beginning to realize this after they've dropped price and seen little effect on revenues. PC manufacturers, for example, have slashed prices, but sales, especially to consumers, are still stagnating. Perhaps price cuts aren't working because price isn't driving value, and maybe value isn't driving the purchase decision. [Marketers interested in figuring out what is driving the purchase decision in their industry can read more it in Driving Customer Equity, by Rust, Zeithaml, and Lemon.]

Though they may not have an effect on revenues, price cuts can cause serious problems if they reset buyer expectations about prices or go against a brand's image. Handheld computer manufacturers Palm and Handspring, for example, have been locked in a price war for the past several months in an effort to boost sales. But according to IDC analyst Kevin Burden in a recent interview with CNET, lowering prices further, "would lower consumer's expectations on what personal digital assistants should cost and, in the worst case, shatter consumers' perceptions that personal digital assistants are more than just organizers."

Marketing expenses to promote the price cuts or fund incentives, coupons, and rebates aren't small, so companies should really consider all the implications of a price reduction—not just the revenue potential—before cutting price.

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Like many Americans we took solace in museums following the horrific Sept. 11 events. In addition to comfort, we discovered that museums have increased their marketing sophistication over the past decade.

"Historically, museums emphasized collections and understanding objects and specimens," explains consultant Will Phillips. "The resultant strategy played on a field of dreams: collect it and they will come."

This strategy may have worked for a time, but today there are hundreds of thousands of museums and cultural attractions in the world. In the U.S. alone—the country with the highest number of museums—there are more than 8,000 museums. In other words, competition for visitorship (not to mention for funding, volunteers, collections, and other resources) dramatically increased.

Visitors also began to look for an "experience," rather than pure education from museums. In The Museum Experience, researchers John Falk and Lynn Derking compiled results of over 15 years of visitors' studies, audience evaluation, and feedback, and found that visits to attractions like museums and other cultural institutions are social experiences. Very often, people come in groups or want to be with people and consider socializing as the most important thing to do during a visit. In addition, the increasing diversity of their audience spoke of the need to increase the cultural variety of exhibits.

To be competitive, museums are providing more opportunities for "edutainment" and social interaction. No longer depending on their collections alone, museums are designing music, special exhibit and guest speaker programs, and social events that are bringing people in and together at museums.

Museum marketing managers are becoming savvier at understanding their target audiences and designing programs that appeal to those visitors. In the wake of September 11, for example, New York's Metropolitan Museum of Art held noontime chamber music concerts for New Yorkers who chose museums as a place to reflect. "This is precisely the time we should be providing a comforting experience," said museum director Philippe de Montebello. "People who haven't had the heart yet to go back to work have been coming here for a sense of serenity and the intercession of other people, rubbing shoulders in a kind of womb of culture. Hospitals are open. They're around to fix the body. We're here to fix the soul."

The focus on target audiences has paid off. Total attendance at art museums rose from 163.7 million in 1992 to 225.3 million in 1997, according to the National Endowment of the Arts nationwide survey of public participation. According to a recent Harris Poll, more Americans travel for cultural enlightenment than for sports, shopping and theme parks combined, demonstrating the continued potential of museums to grow visitorship and further enlighten the world.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at ami.bowen@copernicusmarketing.com

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"This is one terrific book. Anyone concerned about attracting and retaining customers in a wireless world must read. Informative and entertaining (you can't read Chapter 11—'True Love on the Tiny Screen'—without learning something while smiling), it is loaded with powerful insights about how to turn CRM babble into practical, profitable advice. I have recommended this book to all of my clients." — Kevin J. Clancy, Chairman & CEO, Copernicus

Whether you love it or loathe it, wireless has arrived. More and more companies are developing wireless promotions and campaigns, but are realizing it still takes permission to make them work. They also have encountered the challenges of adapting to the space limitations of wireless and integrating wireless technologies into existing operations and strategy. In other words, the technology holds promise, if only companies can figure out how to make it work for them.

Enter Wireless Rules. The book offers comprehensive and practical instruction for understanding the applications, opportunities, limitations, and potential of wireless marketing.

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With marketing budgets on the chopping block and the prospects of a quick turn around in the economy looking dim, marketers around the world have to do more with less. Execution of marketing strategies and programs, as well as powerful measurement tools that accurately capture and quantify the impact to corporate profits become even more critical to success. In its traditional spirit of providing insights into the essential issues facing marketers today, The Conference Board's 2001 Marketing Conference presents a program dedicated to execution and measurement, entitled Marketing Metrics and Execution.

At the conference, Kevin Clancy, chairman and CEO of Copernicus, will give a talk on counterintuitive marketing strategies during a recession, and Peter Krieg, president of Copernicus, will present a case study on ExxonMobil's transformational "Friendly Serve" campaign with ExxonMobil's global market research manager Bette Hoyt. We'll have those presentations available for download in the next edition of The Copernicus Mzine.

The 2001 Marketing Conference will take place on November 1-2, at the Waldorf=Astoria in New York. Click here for more information about the conference and registration: www.conference-board.org/marketing.htm.

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