Marketing Newsletter
October/November 2008
Industry Insights
Copernican Exploration  
Discovery of the Month
What We're Reading Now
Coming Attractions
Industry Insights

The Do's and Don't's of Recession Marketing


Technically speaking we are NOT in a recession.  According to CNNMoney.com’s Geoff Colvin, “The latest figures show that we clearly were not in one as of midsummer, whether you use the rule-of-thumb definition—two consecutive quarters of GDP shrinkage—or the loose concept of a sustained and significant economic decline.”  But who really pays that much attention to technicalities?  Certainly not corporate America— James Dimon the CEO of JP Morgan, one of the big Wall Street firms left standing, said he believes a recession is just beginning and most of the CFOs polled by CNNMoney agreed.  And certainly not consumers at large—76% of Americans said that the U.S. was in a recession as of March.  As Bank of America’s CEO Kenneth Lewis pointed out that at the very least, “it will feel slow and may feel like a recession,” and that’s got everyone bracing for the worst whether or not it happens. 

Not good news at all for marketers, of course, who will be taking it on both sides with cutbacks by their bosses and their buyers.  Estée Lauder’s chief exec William Lauder told Businessweek he’s preparing for the worst by asking every brand manager, “What must you have?  What would you like to keep going?  And what can you give up?”  AT&T and General Motors slashed their 2008 marketing budgets and Visa consolidated its ad account at one agency to save money in 2009. 

Meanwhile, “cowed by the financial crisis, American consumers are pulling back on their spending,” reported the New York Times.  “Recent figures from companies, and interviews from across the country, show automobile sales are plummeting, airline traffic is dropping, restaurant chains are struggling to fill tables, customers are sparse in stores.”   Businesses are following suit as Sam Rovit, a partner at Bain & Co. notes, “many companies will be forced to cut expenses that in normal times you would not touch.”  Less money to spend to get consumers and businesses to spend what little money they feel they have to spend….not a good scenario.  

If there's one thing that's not in short supply these days it's advice for what marketers could and should do to grow their business in these (real or imagined) tough economic times—seems like we come across one trends overview or tips piece at least once a day.  We sifted through the hottest trends in recession marketing tactics and the raft of strategic opinion articles to come up with our suggestions of what to file under “do” and “don’t.”

Maybe Do/Maybe Don’t: Increase Your Marketing Spending
If we had a dollar for every time we’ve heard someone tell a marketer their best piece of advice for thriving in a recession is to raise the marketing budget and spend more, we wouldn’t have to pop an antacid after checking our 401(k)s.  It’s positioned as counterintuitive, but it’s become so commonplace to hear, “hey, you should be taking advantage of the fact that all your competitor’s are slicing their spending and raise your marketing budget." It’s almost conventional wisdom that it’s a universally good thing to do.  What's more, so few companies actually do it, it still holds some of that maverick caché.  But is it really sound advice?

We’d agree there are some obvious inherent risks to holding the marketing budget steady—and even more to cutting it all together, a likely scenario these days—while a stronger brand was solidifying, maybe even increasing its lead in the marketplace by spending more on marketing.  Generally speaking, however, to increase or not to increase the marketing budget is an incomplete question.  At the end of the day, whether or not you’ll see any bottom-line benefit in the short- or long-run depends on a whole lot more than the size of the increase to your budget.  No matter the condition of the economy, the buyer target the brand’s positioning, the ad copy, the ad executions, the media vehicles are more important than the budget in driving revenues. 

In a recession, if you don’t have all your strategic elements lined up, put a hold on spending more money on marketing communications.  Once you get a great strategy in place, then have at it.

Do: Walk Two Miles in Your Customers Shoes
“Walking in the shoes of your consumers is the key to keeping products moving during a recession, the CMO of Kraft Foods Mary Beth West told an audience of fellow marketers.  “And I am talking about walking not just a mile, but two miles.” 

Our take on her comment is that marketers should not only NOT guess at what will or won’t work to motivate buyers during a recession, but also go beyond the customer information basics that everyone in the category likely has.  Take the time to ferret out important insights specific to your brand such as who the profitable customers are, the problems the profitable ones have, the products (or services) they are looking for in the category, and on what (and it’s more likely than not there is something) they place a premium that will get them to part with their scarce resources.  The brands that will win this footrace are the ones that have the deeper knowledge of the twists and turns of the course.

Don’t: Get Ugly With Your Advertising
Maybe it’s the presidential election and daily onslaught of negative, spiteful political attack ads running that got marketers thinking about using this approach to spur sales. How else to explain why, as reported in the Wall Street Journal, “As the economy gets ugly, marketers are getting nasty too. From soup companies to pizza chains, marketers are stepping up their so-called attack ads, calling out rivals by name, comparing products and poking fun at competitors.”  The National Advertising Division of the Council of Better Business Bureaus—a.k.a., the ad police—has seen complaints from marketers alleging they are the victims of misleading comparison ads jump substantially. The number of challenges more than doubled in August and September alone.

“In a downturn, people are being more and more careful on how they are spending their money, and more than usual you have to make sure you are breaking through and giving them a reason to buy you,” explains Patrick Doyle, president of Domino’s USA. He’s got a point, but “their brand sucks” isn’t going to do it.  First of all, it’s not exactly a defensible positioning—it’s likely quite easy for your competitor to come right back and say, “no, no, YOUR brand sucks.”  The back and forth starts and pretty soon buyers have no idea who the ads are for or why they should buy either brand. “Attack ads,” said the Wall Street Journal, “when they get too intense, can confuse consumers.”  If your advertising raises more questions than it answers, you’re going to get tuned out.  

Do: Find the Blue Sky/White Space/Big Hairy Opportunity
If there’s a little something to the “your BRAND sucks” idea, however, it’s that there’s a pretty good chance there’s some area of importance to buyers in the category where everybody—you and your competitors—totally sucks.  Where no one offers a solution to a seriously irritating problem or at best gives a middling response to something buyers say they really need or want.  These areas are the blue sky, white space, whatever-the-going-catch-phrase-from-popular-business-book is—the things that make for the big marketing opportunities.

If ever there was a time when people are aware of their problems, pains, areas of dissatisfaction and willing to talk about them, it’s now when the economy is really in the crapper. Ask buyers what they aren’t getting from your brands and others. Instead of calling out your competitor’s deficiencies, figure out what people are missing in the category in general and determine if you can deliver it to them profitably. Don’t waste your breath (and precious advertising dollars) explaining how and why your competitors can’t get something (or anything) right.  Instead, explain how and why your brand is uniquely qualified to solve their real problems in your advertising.  Give people a reason to listen and you will break through—now in these tough times and, very importantly, when happy days are here again.

Don’t: Enter Into the More-for-Your-Money Race
It’s a natural response to cutbacks by your customers: drop your prices, advertising more for less, give great deals.  “Marketers across the board are dialing up the more-for-your-money messaging in an effort to coax cash-strapped customers into opening their wallets, and price cuts and promotions are creating a domino effect as companies chase best-deal status,” reported Ad Age.  Sadly, the assumption that lowering prices will motivate people to buy may miss the mark and hurts brand equity in the process.

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 and service categories. Even during a recession.  Price may become a more important consideration as household and corporate budgets get tighter, but it is not necessarily—or even customarily—the most important consideration. The majority of buyers are simply not as obsessed with price as many marketers seem to be.  What’s more, price cuts can cause serious problems if they reset buyer expectations about prices or go against a brand's image.  The halls of marketing history are littered with brands that dropped their pants to make a sale in a recession only to find they couldn’t pull them back up again once it was over.

As for our own personal advice, we'd say the biggest DO for marketers in a recession and beyond is to get a strategy in place to drive sales, profits, and growth.  It’s a blanket suggestion that applies to any business, anytime, anywhere, but just becomes more apparent when the buyers of your products and services are really struggling that your marketing efforts need to have pinpoint accuracy in terms of who you are talking to, what about, and when to get them to pledge their patronage and loyalty to your brand and not somebody else’s. 

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Copernican Exploration
 

Five Signs of a Good Buyer Target
Why Analysts Should Ask Wendy's "Where's the Beef"


On the heels of its $2 billion purchase of the country’s #3 burger chain Wendy’s, new corporate parent Triarc handed CMO Ken Calwell his first assignment: change your buyer target.  The previous management team’s strategy to go after 18-to-24-year-olds—a favorite of the fast-food set because of the massive quantities of burgers and fries they consume—got the heave-ho in favor of a new, broader demographic group, 24-to-49-year-olds.  “We’re not going to focus as narrowly as our competitors, like Burger King, who target the 18-24 group,” Wendy’s rep Bob Bertini told reporters.  “Our research shows consumers still give us credit for high quality. That’s a platform we can continue to build upon to differentiate ourselves from our competitors.”  Analysts, however, weren’t so sure.

While “Wendy’s sees the more mature consumer as a less mature market,”or so Brandweek’s Kenneth Hein reports, Ron Paul, president of the food service consultancy Technomic, counters that “walking away from the most desirable segment is a risky strategy.  It’s understandable that the [24-49 segment] is less competitive, but there’s a reason it’s less competitive."  These folks, after all, don’t buy fast food as much or as often as 18-24 year-olds and, to quote Hein again, “older consumers tend to gravitate away from fast food.”  Paul also wonders if Wendy’s, after years of focusing on a younger demographic, has the “marketing clout,” to go broad. 

As our readers know, we hold the targeting decision above all others.  To paraphrase the great Phil Kotler, dean of marketing professors, nail targeting and the rest of your strategy will fall into place.  Whenever we’re asked about the merits of one company or another’s target selection, we always look for five signs that it has found one that will help it grow its business:

1. It's sufficient in size to merit disproportionate attention (e.g., 10%-30%).

2. It's growing over time.

3. It's different demographically (or corpographically if you’re marketing to businesses)—and therefore differentially reachable with media.

4. It has problems/needs/wants that are distinctly different from other segments.

5. Its potential profitability is considerably greater than its size (e.g. 50%-70%).

Now poor Wendy’s has lurched from one ad campaign to the next for the past three years resulting in flat sales at a time when McDonald’s and BK have seen a resurgence.  Will the firm’s targeting decision put them on the road to recovery or do the analysts have this one right?  

Unfortunately for Wendy’s, the signs that they’ve nailed the targeting decision aren’t all there.  On the plus side, the 24-to-49 is BIG and GETTING BIGGER.  Obviously it’s a demographic segment so can indeed be found in media databases. When it comes to the problems/needs/wants of this group, however, it’s hard to imagine a 24-year-old is looking for the same things in a fast-food burger place as a 34-year-old, let alone a 49-year-old, not to mention that these universal needs that span the ages would not reach beyond this group’s borders.  Along this same line, we expect a 24-year-old does not have the same media exposure patterns as a 34-year-old and forget about a 49-year-old.  Maybe there’s some overlap, but we’ve got to think Wendy’s media budget will either have to be massive or will be spread pretty thin, raising questions for us about effectiveness, efficiency, and profitability. 

Our own editorial opinion is Wendy’s may have taken a step in the right direction, but not a very big one.  With BK and Mickey D’s going after the younger set, Wendy’s had stiff competition and looking at other segments isn’t necessarily a bad idea. In general, however, a demographic segmentation such as what Wendy’s appears to have gone with can be problematic.  Sure, it has some positive characteristics—what could be easier to explain and for everyone in the organization to understand than, “Hey, we’re targeting 24-49-years-olds?”  The serious downside is demographics rarely predict buying behavior and a big demographic target like the one Wendy’s plans to pursue is probably much more heterogeneous—with different consumption patterns, brand preferences, attitudes, values, needs, etc.—than homogeneous.  In this situation, effective, efficient, and successful marketing becomes much more challenging. 

The tribulations don’t stop there.  Wendy’s management has already conceded that the folks in the selected demo aren't all that excited about fast food to begin with.  How much extra will Wendy's have to spend to entice them into a restaurant? Will it make up the additional spending with higher prices or volume?  Wendy’s has also already cued up ‘quality’ as its major selling proposition, but is this an overriding problem or need indigenous ONLY to this group?  It’s certainly conceivable that as people get older, quality becomes an increasingly high priority, but Burger King and McDonald’s have made up ground on quality issues.  We wonder if it’s as compelling and differentiating a positioning message as it was a few years ago when Wendy’s was THE quality leader.

Given all of these questions, we don’t think that analysts are way off base to wonder if Wendy’s has really found all that meaty an opportunity with their new target group.

 

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Discovery of the Month
 

The Real Mystery of Political Polls


We’re getting down to the wire in the U.S. presidential election and all eyes are on the polls. Yet for all the talk about who's ahead and by how much, there’s even more talk about why the results of the polls are not all that valid.  After so many embarrassing invalidations of polling work, everyone—from the candidates, to the media, to the pollsters themselves—routinely hedges the numbers with one explanation or another about why we shouldn’t be too surprised if the outcome on election day looks nothing like what the polls prognosticated. 

Throughout history, there have been many explanations for “polling failure.”  In 1948, for instance, the Readers Digest poll—at the time the most prestigious in the nation—predicted that Thomas Dewey, the Republican, would win big in the presidential race against Harry Truman, the Democrat.  Truman, of course, ended up winning and the perception of polling as a reliable resource hasn’t been the same since.  In this case, the reason the polls were so off was the unrepresentative nature of the Readers Digest sample.  As it turned out, the magazine’s readers and poll sample were more Republican than the rest of the country.

These days most polling firms—including Gallup, Pew, USA Today, Zogby, and Rasmussen—use a relatively straightforward polling technology: they ask people a single question about who they plan to vote for in the next presidential election.  They present the options and let respondents decide. They do this on the phone, sometimes in person and increasingly over the internet.  Each respondent is then weighted by his/her self-reported probability of voting or estimated probability of voting based on past returns for the region/state/city/zip code and/or demographic profile they exhibit.  The more sophisticated the weighting, the more accurate the poll. 

While we haven’t come across too many people taking issue with the sampling and weighting of 2008 presidential polls per se, many have wondered aloud about how honest potential voters are with pollsters when it comes to their intention to vote for Barack Obama.  As FOXNews put it, “white voters are hesitant to tell pollsters they won’t vote for a black candidate.”  To put it in research speak, respondents are “overstating” [sounds a lot nicer than bold -ace lying, no?] their support.  The reason for the overstatement is hardly a mystery—it’s often called social desirability response set which might be described as the generalized tendency for respondents in an interview to say nice (aka desirable or politically correct) things about themselves to look good and to avoid saying negative, politically incorrect things.

Anytime we have an opportunity to say something nice about ourselves—we watch PBS, brush and floss our teeth three times a day, and have sex 10 times a week—we tend to take it.  Conversely, if we have the opportunity to under-report negative or socially undesirable attitudes and behaviors—we hardly drink at all and certainly never watch the Home Shopping Network—we’ll take that too.

Pollsters know about this bias but have ignored such effects because they’re not that important in a typical poll or election.  In most political races, there isn’t a socially desirable or politically correct response—there’s just candidate A, candidate B, or none of the above.  They might as well be asking if you prefer Coke or Pepsi, white, wheat or rye bread.  But in some races—Obama v. McCain as an example—there just might be a “right” answer respondents feel they need to give. 

The real mystery here is why pollsters aren’t checking for the existence of response bias this year.  By asking respondents who their best friend is going to vote for, for instance, they could gauge the level of bias present.  Pollsters could also do their interviews in person in locations around the country where people can actually go into a simulated voting booth.  In these cases, the prospective voters are convinced of their anonymity and are much more likely to express the truth than they are when responding to a stranger on the telephone.  The latter method is more expensive to execute than conventional polling, but much more likely to yield valid answers particularly where social desirability response bias is likely to occur.  Given the drubbing polls have taken in recent years for inaccuracies and lack of predictive capabilities, it may not be a bad idea for pollsters to consider.

 

 

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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What We're Reading Now
 

At the Top of Our Reading List....


Your Gut Is Still Not Smarter Than Your Head
By Kevin Clancy and Peter Krieg (Wiley, April 2007)

As the economic outlook grows gloomier by the minute, marketers can ill-afford to leave the performance of their marketing programs to chance.  As we talked about in “Do’s and Don’t’s of Recession Marketing,” intuition about what will spur sales of your brand—dropping prices, running promotions, going negative with your advertising to call out problems with you competitor’s brands—can lead you in the wrong direction.  Your Gut Is Still Not Smarter Than Your Head is full of ideas for infusing research in different areas of marketing decision-making so you can make more informed choices about who to target, what to say, and when and where to say it. 

Tuned In: Uncover the Extraordinary Opportunities That Lead to Business Breakthroughs
By Craig Stull, Phil Myers, and David Meerman Scott (John Wiley & Sons 2008)

Tuned In

 

We’ve been hearing quite a bit about Tuned In and its very appealing (to us) message that, “your business must be continuously problem solving for your market.” 

So many new product/innovation books focus on how to encourage creativity and idea generation and certainly those things do have an important place in the process.  But as everyone knows, creativity alone is no guarantee of success. That’s where Stull, Myers, and Meerman Scott jump in with six steps for developing a “resonator,” a product or service “that so perfectly solves problems for buyers that it sells itself.”  We especially appreciate their urgent plea to stop guessing at what will be meaningful to customers.  Great case studies and examples from across industries, too.


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Coming Attractions  
 

American Marketing Association Selects Copernicus as Content Partner


We’re very proud to announce that the American Marketing Association (AMA) selected Copernicus as an exclusive content partner for the association’s web site, www.marketingpower.com.  We join a small select group of partners providing, new, relevant, and insightful information about different marketing topics. 

“The American Marketing Association is dedicated to providing quality information to today’s marketing professional, enabling them to make better decisions faster and increase their competitive advantage,” explained the AMA.  “We are committed to partnering with world-class organizations to provide our membership and customers with the most relevant and valuable content available.”  Other content partners include the prestigious management consulting firm McKinsey and the think tank, Society for New Communications Research.

The AMA selected pieces from our website and—your favorite marketing e-newsletter and ours—The Copernicus Mzine.  Visit www.marketingpower.com for a complete list of Copernicus content.

Getting Marketer’s To Eat Their Spinach: 10 Minutes with Copernicus’ Steve Tipps

The editor of Marketing News sat down with Copernicus’-own Steve Tipps to get his thoughts on why marketers are turning away from marketing research at a time when they need it more than ever.  Steve offers his thoughts on the current situation and perspectives on other issues in research and marketing. 

Take a read: http://www.copernicusmarketing.com/about/steve-tipps-marketing-news.pdf

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