How to Market During a Downturn

CMO Roundtable: Execs on Maintaining Budgets, Changing Marketing Mixes and the Challenges of 2009

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Just days before the Dow suffered its largest single-day point drop ever Sept. 29, Ad Age Editor Jonah Bloom sat down with three top CMOs to talk about marketing in a recession. On hand were Ranjana Clark, senior exec VP-CMO of Wachovia Corp.; Tom O'Toole, CMO and chief information officer of Global Hyatt Corp.; and Mark Chmiel, exec VP-chief marketing and innovation officer at Denny's Corp.

Jonah Bloom: Ranjana, obviously in the last couple of weeks, all the news has been about the meltdown on Wall Street. Wachovia is caught up in that to some extent, in that you obviously have some exposure to the adjustable-rate mortgages, and there is talk of you acquiring or being acquired. What's the CMO's role in such a period?

Ranjana Clark: In this environment, a lot of financial-services companies -- including Wachovia -- we really focus on three things. One is capital generation and preservation. Second is liquidity. And third is earnings growth. So as head of marketing and leading our division, I am keenly and intently focused on advancing the agenda around capital generation and preservation.

Mr. Bloom: Do you have to change tack in terms of messaging at a time like this?

Ms. Clark: Absolutely. There are probably two kinds of messages that we are going out with. One is the strength and stability of our institution. And I think we've said that in our advertising, but more importantly, we convey that to our customers and clients through daily contact. So we want them to feel assured that we've been here for over 100 years, and we intend to be here for well over 100 years into the future.

Second is really proactively reaching out with advice. There's a lot of nervousness out there, and I think that we are big in the financial-advisory business, and we are great in terms of relationship management and client service. So what we are doing is launching a proactive effort to reach out to over a million customers and really make sure that they understand the actions that they need to take to position themselves for success. We work very closely with our financial advisers. Certainly they bring the skill set in terms of going over the asset allocation and diversification. And long term, your portfolio should be suited to your life goals and your risk tolerance. So those are the kinds of things that they are good at, and we help them crystallize those messages and get them out to their clients.

Mr. Bloom: And what have they told those who have said there's $120 billion of real-estate exposure for Wachovia? It is difficult to message around that, isn't it?

Ms. Clark: We have sort of taken accountability for it, and our CEO has outlined strong steps and measures to work through it. And he has been pretty vocal in terms of communicating it at analyst conferences, on CNBC, etc. So we definitely own up to that. We also have about $50 billion of tier-one capital, and 87% of our liabilities are long-term-funded or have equity or are funded by deposit. So it's things like that that I think we want our clients and customers to understand, that there is a lot of strength and stability and support behind this institution, despite the fact that we do have some real-estate assets.

Mr. Bloom: Most of our readers are involved in the business of marketing to consumers, and, for a lot of consumers, beyond maybe a 401(k), their exposure to Wall Street seems relatively limited. How much do you think it affects consumers when we have this kind of financial meltdown? How much of an impact do you see on your business?

Tom O'Toole: Demand is actually holding up relatively well. What one sees is an increasing caution, and increasing thoughtfulness and carefulness about how one plans to spend money for, in our case, hotel expenditures. So I think it's recognizing that greater awareness of the need for value, and yet at the same time recognizing that the demand is still there.

Mr. Bloom: To what extent do you change tack from a focus on the facilities and the high-end things you have to offer toward value?

Mr. O'Toole: I think it's really a two-tiered question. The fundamentals of the brand positioning and the brand marketing are not changed at all -- not in terms of budget, not in terms of message. In terms of the supplemental efforts, to drive short-term business, it's a matter of shifting, adjusting the orientation to offers and marketing methods -- e-commerce specifically -- designed to directly generate short-term revenue production.

Mr. Bloom: Mark, how do you feel the effects of the crisis on Wall Street?

Mark Chmiel: The consumer is redefining value in our segment. They have come along and told us: "I only have a certain amount of dollars in my pocket." "I can only afford" -- in our category -- "four, five bucks for breakfast." "I can only afford X amount for lunch and dinner." And that is affecting our tactics, and, in fact, we're going to roll out a new breakfast, and it's focused on a price point, even though it is reinforcing our overall brand, which is trying to own breakfast, which is the cornerstone of our branding. We've never heard that before, where a consumer says, "I only have X dollars to spend. Period."

Mr. Bloom: But you always had a value proposition. What differences are you seeing between research you conducted a year or two years ago and now?

Mr. Chmiel: We conducted research maybe 11, 12 months ago, clearly asking the question: Why aren't you going to Denny's more often? The No. 1 reason was new products. "We want to see something new from Denny's." Now, fast-forward to a month ago, two months ago. They said new products were nice -- and we still are developing a very steady pipeline -- but price and price point was their No. 1 reason. So it had shifted from new products, excitement, rebranding, to "I only have X amount in my pocket."

Mr. Bloom: You hear experts say now is a great time to gain market share against your competitors if you maintain your marketing, but I always wonder how you guys are able to convince people in the boardroom. Has marketing shifted to really being seen as an investment within Wachovia? And how do you manage to maintain those budgets?

Ms. Clark: I think it's definitely seen as an investment. And I think the way we persuade people that it's an investment is measuring the return on it. Having said that, we have cut back on brand advertising through the cycle, just being cognizant of where the company is, where the industry is.

We've never been a huge brand advertiser. We believe our brand is really best communicated when people experience it. So we have other ways for people to become brand advocates vs. through advertising. A lot of our advertising is aimed at product-demand generation. And what we do is ensure that all elements of our brand play through and come across and are consistent with the messages that we are portraying through promoting a product.

I think building our brand right now and particularly through next year, is very important, because at some point the smoke will clear. And I do believe that the best brands will stand out in terms of retaining customers and growing that book of business with prospects.

Mr. Bloom: Tom, you mentioned staying strong. You've maintained your budgets?

Mr. O'Toole: We have maintained our budgets fully. I think it's important to talk about the process of how we reached the decision to do so, which was open and fully engaged discussion among the senior-most management team, the CEO and the C-level executives that reached three conclusions: first and foremost, that we are well along in a multiyear process of brand development. We are gaining market share. And now is not the time to be ambivalent about funding it. So we maintained our marketing budgets in full. Specifically, we've maintained our brand-marketing budget in full. We have not cut it at all. And we've shifted additional marketing funds out of non-directly brand-building activities to directly revenue-producing activities.
Mark Chmiel
Mark Chmiel, exec VP-chief marketing and innovation officer, Denny's Corp.
Tom O'Toole, CMO and chief information officer, Global Hyatt Corp.
Ranjana Clark
Ranjana Clark, senior exec VP-CMO, Wachovia Corp.

Mr. Bloom: When you talk about those things that you know are revenue producers, what are those?

Mr. O'Toole: First and foremost is e-commerce. Acknowledging that e-commerce now includes a growing set of activities, from social networking to search and our brand sites and a wide variety of other things in between, we have shifted a significant portion of budget -- not incremental budget -- directly to driving short-term business through the brand site through search. That is highly measurable, that is precisely manageable, that is able to be redirected on short notice. So we have taken our already not-insignificant commitment to e-commerce in general and search in particular and added to it a substantial increment.

Mr. Bloom: Do you worry about the rising cost of search?

Mr. O'Toole: We monitor that closely, but it remains a very compelling ROI, and more importantly, we know exactly what the ROI is.

Mr. Bloom: Ranjana, have you changed your marketing mix?

Ms. Clark: I think we have become more inside-driven in this economic climate, and so really making sure that we truly understand our consumers and our clients and our prospects, what their needs, wants and aspirations are, not just from a geodemographic standpoint but from an attitudinal and behavioral standpoint and so on, and really making -- using -- those insights to drive our marketing actions.

For example, a year ago we launched a product called Way to Save, which is more of a mass-market product, but it's something that we have had very strong response to, and results related to that. We've opened a million new Way to Save accounts, of which over 30% are net new households to Wachovia. And that was driven by an insight that America just was not saving enough, and that we needed to provide them easy ways and motivational ways and fun ways to get started.

Mr. Bloom: Mark, what shifts are you making? Do you see trends in terms of the media the franchisees want to use and the media that Denny's uses on the corporate level?

Mr. Chmiel: Because of the audience, with the franchisees, they have a tendency to be a little bit older and a little bit more mainstream. But they're open to new ideas. One of the really difficult things for Denny's is we have about 98% brand awareness; 94% of people 12 years or older have gone to a Denny's. So we have this ubiquitous brand out there, and how do we communicate our message?

And then the media has changed so much. Years ago, you could buy three or four networks and roadblock and guarantee a share rating. We go back to being consumer-based and [focusing on] what is a consumer looking for and where is the best opportunity to dig deeper with them? So while we're looking for top-of-mind awareness to drive retail, we want to develop a much deeper relationship.

A good example is, in our late-night business, which is 10 p.m. till 5 o'clock in the morning, targeted 18 to 24, we bought a little bit of MTV and a few other channels like that. But as compared to my days with marketing Dr Pepper years ago, when [TV was] all you needed, the internet came into play. But it didn't come into play to say, well, let's just buy the internet. We looked at what was the consumer looking for? And it led us to the internet, events, music, and we actually have adopted bands, where we sponsor these up-and-coming bands. Well, that affords us the opportunity to be on their sites. Katy Perry was an example of who we sponsor. We're then on the front of, because we were sponsoring these bands. It led to other blogs. It led to so many things that were deeper and richer. So we didn't intend to go in and say we want to be on these sites or on the internet, but rather the consumer said this is the best opportunity to really connect with them. And then we took a step back from it and said, well, where do they want to connect? It's not just a Denny's banner ad. Rather, it's content and relationship. And that led us to these adopted bands where we actually sponsor these up-and-coming bands when they're on the road.

Mr. Bloom: How do you measure that kind of activity?

Mr. Chmiel: I think that's another excellent question. One way is we look at the traffic to our site. We have We've had over a million hits on that site in the last three months since we've started the program. OK, hits are one thing, people going to your site. We also dig deep into groups or ethnographies with consumers. What kind of relationship do they have now with Denny's? What do they think about Denny's? Has that changed? So I don't think it's going to be an ROI in terms of sales. We would look at this type of marketing more as investment spending for the brand. We have to look at the brand-building aspect of it then too, not just sales.

Mr. Bloom: Ranjana, how important has the internet become to you as a marketing tool?

Ms. Clark: We want to be sure that our e-commerce sites and online information is very well laid out, so that when prospects or even current clients come to search it is organized in a logical and easy-to-navigate fashion. And that, hopefully, it drives them to action. If they can fulfill online, that's great, but a number of them prefer to search online and then buy, by either calling a call center or going into one of our financial centers for retail services or one of our brokerage offices for our investment businesses. So making sure that your website is great in terms of the landing pages, the navigation, the searchability, is key. So we focus a lot of time and attention on the website itself.

Secondly, for us, a number of our customers actually transact online every day, and we move billions of dollars every day for very large corporations across the world. So we've got to make sure that we have the right payment capabilities, the right information capabilities, because for a number of these companies, making the payment is important, but getting the information right away is just as important to be able to reconcile their books, and so on. So really, continuing to invest, for example, in a product called Wachovia Connection, which is an online cash-management tool for corporations -- that is exceptional. Security is a concern. So phishing attacks, malware, etc., I'm sure you're very cognizant of those things. Those are things we take very, very seriously.

Then the third element is just how we use online marketing -- our search tools and investment, display, the interaction between those, and how we drive them back to or how we drive action around those. And, like everybody else on this panel, we have significantly increased the percentage of media mix that is devoted to online.

Mr. Bloom: How do you see 2009?

Mr. O'Toole: The balance of 2008 and 2009 is going to be a challenging period. Challenging is not a euphemism for categorically down, because, again, contrary to what one may imagine, demand in our business remains relatively strong. I think a more accurate characterization through 2009 is that certain segments of the business are going to continue to grow robustly. Certain segments of the business are more severely impacted. And it's going to be a time for highly targeted, highly differentiated marketing activity but by no means simply a wasteland of lack of demand. It's going to be a time when differentiating by business segment is going to be critical. But 2009 is going to be a challenging year.

Mr. Bloom: Any tips in terms of what marketers should be looking for in these tougher times?

Ms. Clark: Start with insights regarding your consumers. What are their needs? What are their wants through this cycle? Make sure that your entire offering really proactively mirrors that.

Mr. O'Toole: Now is when expressions of conceptual commitment become real decisions, in the sense of does one cancel the fall television campaign or not? Because that is going to be a tangible indication of, are we really committed to this multiyear brand effort or aren't we? Do we sustain the brand commitment when times are challenging, or do we waffle? And people will remember that.

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