Unilever, Walmart, P&G Buck the Short-Term Trend

As Recession Forces Cuts, Leaders Build for Future With Marketing, R&D

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BATAVIA, Ohio (AdAge.com) -- It's been said over and over: There's no time like recession, when competitors are retreating, to ramp up innovation and marketing to grab share.

So far, the competitors have done their part. U.S. trademark applications through mid-June were down 17% from a year ago; patent application growth stalled last year after more than a decade of high single-digit annual growth; and ad spending plunged 14% last quarter, according to TNS Media Research.

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The intrepid share-grabbers have been harder to find. Now, however, as the dust settles from the fourth-quarter financial collapse, a growing number of them appear to be sticking their heads out of the bunkers to lay the groundwork for long-term growth in a short-term-obsessed world.

The recession, said Stephen Quinn, Walmart U.S. chief marketing officer, is "actually causing us to be longer-term focused, and to think about things like loyalty and lifetime value of the customer and how do we use this opportunity to keep these folks with us for the long haul."

In the current fiscal environment, that can take some intestinal fortitude. Walmart stopped feeding financial markets a steady diet of short-term metrics -- monthly sales figures -- in part to help it focus on the future. Unilever and L'Oreal scrapped earnings forecasts earlier this year, the former maybe for good. Henkel and Clorox are cranking up their marketing budgets. And Procter & Gamble Co., while not scrapping earnings guidance entirely, did pull it back substantially and left open the door for further revisions recently as it focuses on growth in what it calls "an investment year" in 2010.

Time to shine
In fact, considering the competitive landscape and the company's own recent history, P&G Chief Technical Officer Bruce Brown made a fairly bold prediction on Fox Business News last week: That 2010 would be P&G's biggest year for innovation in a decade. That's a pretty tall order considering the decade includes calendar 2000, which saw the launch of Swiffer, a new form of facial cleansing in Olay Daily Facials and a new form of tooth whitening in Crest Whitestrips.

In some ways, recession is ideal for marketers to focus on the long term, because financial markets are more forgiving on earnings targets than they've been in years, said former P&G Global Marketing Officer Jim Stengel, now a consultant and soon-to-be UCLA marketing professor.

Still, it can rankle Wall Street; just ask Paul Polman. One of his first moves when he took over as Unilever CEO earlier this year was to scrap earnings guidance. While initially it looked like a short-term measure because of economic uncertainty, he quickly embraced it as a longer-term strategy that will give the company financial flexibility to maintain marketing support as needed regardless of quarterly financial pressures.

Unilever's stock took a short-term hit as a result, as analysts and investors decried the lack of visibility. "These are staples, and investors like them because they're predictable," said Sanford C. Bernstein analyst Ali Dibadj of package-goods companies. "So if they stop giving guidance, people get annoyed." While investors recognize the need to invest in the long-term, lowering or scrapping guidance is also seen as a sign something is wrong or that companies can't forecast properly.

But with so many factors outside marketers' control right now -- including recession, foreign currency and commodity fluctuations, investors are probably more understanding than they've ever been. "If you give guidance on 10 things and you miss one, everyone's going to focus on the one," said Deutsche Bank analyst William Schmitz. "In the current environment, how can anyone really give guidance? They don't even know what their categories are going to do."

Positioning for future
Starting in the current quarter, Mr. Polman said Unilever is ramping up support behind such products as Dove hair-minimizing deodorant. The company also has invested in a host of new innovation approaches, such as a global project for Axe in which the consulting firm Face Co-Creation helped assemble a group of 16 target consumers to help vet a new scent and develop the marketing plan behind it.

His plan is to develop products and market now to position Unilever for a post-recession future in which consumer behavior will have shifted permanently away from conspicuous consumption. "If you decide not to buy a new TV or a car or a camera every few years," he said, "then you're often talking about saving the amount of money you would spend on our products for the whole year."

Shifting thinking to the long term often means using the same metrics that long have justified short-term thinking, but turning them on their head. Scanner data and marketing-mix modeling for example, have long been scapegoats for critics of short-term thinking because they readily demonstrate the "pop" from price promotion more vividly than the longer-term build of advertising. The reality, however, is that analytics can also be used to support a longer-term approach. Walmart's Mr. Quinn supported a 66% hike in measured U.S. ad spending last year using marketing mix-modeling. "Walmart is a pretty tight ship when it comes to costs," he said, "and there is no way that anybody would have approved the spending if they hadn't felt it was going to pay out."

By eliminating reporting of monthly sales figures recently, Walmart Stores made it a little easier to focus on the longer term, even if that term is three months rather than one. But the biggest part of focusing on the long-term in marketing, he said, has been linking it with other parts of the company's culture.

"Maybe being a little more confident that we can deliver the short-term, we've been talking about how do we use this opportunity to build the long-term business, and we're doing that in a culture that already supports more long-term thinking as well," Mr. Quinn said. "Brand thinking was not really part of this culture, but it's a great fit with a culture that wants to be around for generations to come."

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