Welcome to 2008. It's going to be ugly.
For CMOs, existential danger lurks with every incoming report about the sagging economy and the looming recession. Recessions are tough for those in charge of top-line growth, especially considering the average two-year tenure -- in good times.
While the economy at large may yet dodge a bullet, many sectors are already in recessions -- the automobile industry, housing, finance and key elements of retail such as department stores.
The U.S. economy is facing a perfect storm. The housing crisis, the credit squeeze, spiraling oil prices and the bottomless dollar slide have resulted in a confluence of unprecedented events and downside pressure. Consumer spending is likely to be bruised much more significantly than it was in 2001, when the stock market collapsed in the wake of the dot-com implosion. Consumer confidence is already in retreat, as consumers switch from tipping point to tapped-out point. Once consumer spending tumbles, it will hurt investment and profits. The weak dollar will boost exports, but at only 12% of GDP, the growth in exports is no match for weakening consumer spending, which accounts for 70%.
CMOs will come under pressure like never before in this recession as consumers desert the marketplace in droves.
Recessions are arguably the most challenging times for a CMO.
Top-line growth is harder to drive, marketing budgets are being scrutinized and the marketing landscape is shifting daily, while seasoned and trustworthy communications sherpas are hard to come by. Yet, the glass need not be completely empty or even half empty. That's because recessions, like any sort of disruption, create opportunities. Those who are ready will profit by it and thrive.
Here are some thoughts on how you can face the deluge better prepared.
Six ways to navigate in times of trouble
Illustrations by Tom Nulens and Scott Dunlap
Don't manage marketing activity in a recession through the rearview mirror. This recession will defer from the last one in that it will be consumer-led, or retreated, rather than corporate-focused like previous ones. With Brazil, Russia, India and China growing at robust clip, CMOs should engage in marketing arbitrage and shift their focus offshore the way corporations performed financial arbitrage by shifting production offshore. China and India are growing faster, and their combined contribution to global GDP growth is greater than that of the United States for the first time.
|THINK SMALL AND BECOME IMMATURE|
Sometimes being mature and acting responsibly is a virtue. Not in a recession. Mature ad agencies tend to avoid risk, and for all the talk about the Big Idea they prefer safe ideas. For sustained growth in a recession, ideas are the currency of competitiveness. It is a good time to evaluate your communication partners and find out who is in the foxhole with you: Are they risk-averse, siloed and traditional? If so, they may not be the right partners for the challenge you are facing. Make sure that your communications partners are smart, nimble and hungry.
|CHECK OUT THE CIRCUITRY OF YOUR OS|
Now is a good time to step back and take a good look at how your marketing operating system is wired. Much has changed since the last recession; has your company adapted? Have you fully integrated your digital and offline capabilities? Have you integrated procurement into your team to ensure that you will achieve all cost efficiencies? Have you established a clear process to maximize collaboration among creative agencies, media agencies, digital agencies and all other communications partners? Step back and take a zero-based approach to the organization you'll need to weather the recession.
|TAKE YOUR BRAND TO A DAY SPA|
Between innovation and stagnation lies adaptation. Don't ignore true innovation, but innovation, unless by luck, takes time. The last thing you'd have in a recession is time -- even if your CEO and chief financial officer will cut you some slack, your competition won't. So go for the low-hanging fruit, not just killer innovation. Improve and differentiate your package design, communications, web design -- things that can give your brand a quick boost and injection of news without a daunting investment or lengthy development.
|INSULATE YOURSELF FROM THE BIG CHILL|
The best insurance against the coming marketing winter is a strong brand. Recessions tend to induce a knee-jerk reaction away from brand commitment in favor of a short-term and shortsighted belief in coupons and price promotions. But reliance on price incentives as a marketing tool is dangerous -- it devalues the brand, and it's hard to wean consumers off it. Just look at the mess Detroit got itself into with all those rebates. The Japanese, on the other hand, stuck to brand building, and guess who's winning that battle. Smart marketers have a longer view -- they actually increase their marketing investments during recessions and focus on their commitment to the brand and the consumer. Study after study shows that brands that stick to brand-building and don't panic tend to come out of recessions stronger than those who revert to price marketing -- and recessions do end, you know. And faster than many people realize: The average recession in the postwar era has lasted a mere 10 months.
It took years -- and Al Gore and Bono -- for marketers and their agencies to discover that corporate social responsibility helps the bottom line. Respect for the environment, helping fight AIDS in Africa and rebuilding New Orleans are as important as a great ad campaign in shaping brand image. People tend to vote for a brand with a social conscience, and smart CMOs will incorporate social-responsibility programs into the fabric of their marketing activity.
Avi Dan is former global executive director of Euro RSCG and managing partner of Berlin Cameron Red Cell.