Del Monte CMO: Spend During Downturn -- or Else

Plus Seven Other Tips for Marketing in Recession

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A correction has been made in this story. See below for details.

SAN FRANCISCO (AdAge.com) -- Spend on marketing, capital investment and innovation or risk losing your business within the next five years. That tough talk came from Del Monte Foods Co. Senior VP-CMO Bill Pearce at the Argyle Executive Forum's CMO Leadership Forum, where his keynote offered bold advice for navigating the titanic shifts that have resulted from the worst economic crisis since the Depression. In an environment where the name of the game is to manage risks, he challenged marketers to take them and offered eight tips for marketing in the downturn.

Bill Pearce
Bill Pearce
1. Don't scale back spending. The old way of dealing with a recession was to slash and burn head count, marketing and capital investment. But companies that do that are likely to be out of business in five years, Mr. Pearce said. "Now is not the time for across-the-board cuts," he said. "The worst thing you can do is make 10%-across-the-board cuts."

Instead, winnow out what doesn't work. Mr. Pearce said marketers need to evaluate every investment and raise spending on the vehicles that are paying off or look promising while cutting the ones that look dubious or break-even. "Get rid of it. If you think it's break-even, I guarantee you're losing money," he said.

2. Reassess your market. The recession has changed everything, and marketers need to keep a pulse on consumer behavior, which is "changing in ways we can't even begin to forecast," Mr. Pearce said.

The recession has triggered a global retirement crisis that will see many baby boomers work beyond their planned retirement years to recoup what the financial turmoil has chipped away from their nest eggs. "Do you think that's going to change how they think about goods and services? Do you think that's going to change how they spend money?" asked Mr. Pearce.

And it doesn't stop with baby boomers. Young people watching Mom, Dad and their grandparents toil into what should be their golden years are going to think very differently about spending too. They don't want to be caught in the kind of financial turmoil that hit their parents, so expect major behavior shifts from the younger set. "Demographic groups are undergoing life-transforming reversals of fortune," he said. "It's a life-altering, generational, scary change, and it's going to change how they make purchases."

3. Identify your best markets. Marketers have to find their most attractive markets, because they're not the same as they were a year ago. "There's no one market dynamic," Mr. Pearce said. "It goes block by block. There are people who can tell you which block is being hit the most [by the economic crisis] and where pockets of stability and growth are."

4. Do some homework. The three questions CMOs and marketers need to be singularly versed in are: Who are your most profitable customers? What are the emerging consumer trends? What are my most effective marketing and sales vehicles?

"You need to understand where your revenue is, because, I guarantee you, your revenue stream now is not where your revenue stream was 12 months ago," Mr. Pearce said. Knowing the answers to those three questions will help marketers figure out where to make investments. Those questions are also the ones that the company CEO or board is going to ask in times like these.

5. Value messaging isn't always about the lowest price. Tough times call for value messaging, but value messaging is not always about the lowest price.

Instead, know what motivates consumers today. Are they looking for brands to save them time? Money? Peace of mind? In this climate, people are often motivated by fear, such as fear of waste, he said. "What if I pay $20 for this service, and it doesn't work?"

6. Keep management in the loop. The goal is to proactively manage your CEO, whose instinct is to cut budgets. A CMO needs to have an ongoing relationship with the CEO. Marketers need to constantly measure everything they do to give CEOs a reason to raise budgets.

Making friends with the person who controls the purse strings is also recommended. Marketers need to constantly demonstrate to their chief financial officers the results and metrics of their investments. When the time comes to make the case to the CEO, you'll have the check writer on your team.

7. Invest in the future. Now's not time to shy away from new ideas, especially if they work. If your message is nine months old, it's stale, Mr. Pearce said.

The companies that invest in innovations and roll out new products and services when the economy makes a turn will reap disproportionate benefits, Mr. Pearce said, citing media, which is more cost-efficient now than it was 12 months ago.

Mr. Pearce's advice is to do what good stock-market investors do: When everybody's greedy, that's the time to take money off the table. When everyone's panicked, that's the time to double up.

8. Turn the crisis into opportunity. Del Monte sees the recession as a time to renew its message and strategy to fit with the new ways consumers are shopping, such as buying value sizes and shopping more at value chains, Mr. Pearce said. As other brands may be trimming their budgets, it's also a good time to make a play for those niches.

Del Monte, for instance, is moving from its traditional battleground in canned foods to expand the market space it plays in by more aggressively attempting to move consumers away from fresh and frozen foods.

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CORRECTION: An earlier version of this story incorrectly reported that Del Monte was moving into fresh and frozen foods. The company is trying to move consumers away from fresh and frozen foods.

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