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Christie Nordhielm
  Christie Nordhielm
 

Recession 101: Marketing Dos and Don'ts

6/7/2010 --

"The number-one mistake marketers make in a recession is losing discipline," says Ross' Christie Nordhielm.

ANN ARBOR, Mich. — Sales down? Check. Consumers skittish? Check. Recovery slow? Check. Cause for concern? Sure. But that's no reason to hit the panic button when it comes to marketing. Christie Nordhielm, clinical associate professor of marketing at Ross, has seen the good, the bad, and the ugly in the recent recession. Just because the economy is mired in a slump is no reason to make drastic changes to the long-term plan, she says.

"The number-one mistake marketers make in a recession is losing discipline," she says. "The possibility of overreacting during these situations looms large, and it has long-term implications."

Tactical tweaks can work, but they have to fit with a brand's image and the company's long-term strategy. With that in mind, Nordhielm shares some dos and don'ts when a recession throws everyone a curveball.

Avoid the temptation to cut the marketing budget.

"It's been well-documented that companies that increase or maintain their marketing level during periods of recession end up in a better position in the end, so cutting the marketing budget should be avoided at all costs even if it means cutting into your profits in the short run," Nordhielm says.

When a company cuts its ad spending, the advertising share of its competitors goes up while prices for print and broadcast ads go down. That leads to a cycle where your competitor gets its message out more and spends less to do it.

"Those competitors who maintained awareness will fare better," she says.

Don't start marketing on price if you're not already positioned as the value player.

A recession brings price pressure and a feeling of uncertainty. One way to deal with that is to drop prices, if only temporarily. But that's a classic overreaction, in Nordhielm's view, and it can have implications across an industry.

"It can be a disaster," she says. "It can lower perceptions of your brand and you will very likely not get the price back. Show me a market with confused and uncertain consumers and I'll show you a market that's going to price. And nobody wants that."

Some auto makers offered big discounts during the recession and it will be hard to wean customers off that deal price, Nordhielm says. It also brings down the value of the brand. Even one big company playing the price card can affect the whole segment. One of the big telecom players marketed heavily on price and it affected the perception of others, Nordhielm says.

"The problem with companies that overreact is that it's very hard to return to normal," she says. "Expectations are that the deals will continue. Consumers are very adaptive where price is concerned."

Even among value players, it's tempting to respond to competitors jumping into the price game. Nordhielm says retail value giant Walmart was a good example of staying on message. It didn't drastically change its strategy, opting instead to reinforce its prior message.

"They stayed steady and prospered by doing so," she says.

Address the uncertainty in a way that fits with your image.

Look no further than Hyundai as a prime example. The Korean auto maker, which has positioned its cars as high-quality products with value prices, offered a temporary deal where customers could return a recently purchased car for a refund if they lost their job.

"It was responding to the serious economic situation, but not with a price cut that would reduce its perceived value," Nordhielm says. "Hyundai is working to establish an image of reliability, so the promotion aligned nicely with that."

Insurer Allstate sent a simple message of acknowledgment, building on its well-known "you're in good hands" slogan.

"You can do price promotions or you can acknowledge people are going through a tough time," she says. "Allstate always had promoted an image of safety and security, so they reinforced the 'good hands' message just to remind consumers how long they've been around. It was a positive tone of reassurance."

Makers of high-end luxury goods can only weather the storm.

These companies have to walk a tightrope. It's critical that any change in the marketing tone not be taken in any way to affect price or the perceived value of the brand. Anything that would reduce costs to customers would increase the company's costs in terms of brand equity. That leaves two options stay the course or try to market to even higher-income customers.

"There are people who made money during the recession," Nordhielm says. "The very high end of the market still has a lot of activity."

Recessions can create opportunity for the smart marketing team, but a company doesn't want to look mercenary. Instead, tactical changes should bolster the long-term strategy.

"It's important for marketing executives to understand the difference between strategy and tactics, both in bad times and good times," Nordhielm says. "A brand relationship is based on trust and all marketing activities should enhance the consumer relationship."

—Terry Kosdrosky



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu