09 05 riding out the economic cycle

Demand Chain Partners 1

RIDING OUT THE ECONOMIC CYCLE- Setting the new agenda for marketing and market research

Professor Robert Shawwww.Demand-Chain.com


Agenda

1. Global Recession, cycles and uncertainties 1. Global Recession, cycles and uncertainties

2. 2. Downward and upward pressures on marketing spendDownward and upward pressures on marketing spend

3. Riding out the cycle from downturn to upturn3. Riding out the cycle from downturn to upturn

4. Return on Ideas: an action plan for marketing and marketing r4. Return on Ideas: an action plan for marketing and marketing researchesearch


The Global recessionOutlook

• Worst global economic crisis since the 1930s

• Worst financial crisis ever

• Uncertainty

• Complete collapse of confidence throughout the industrialised world

• Significant risks of further financial meltdown


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The Global recessionWorld economic growth

Source: Bryan Finn, Business Economics


• Cheap credit

• Financial innovation

• Lack of transparency

• Corporate greed

• Business ethics

• Regulatory failure

The Global recessionOrigins of the crisis


$ billions

The Global recessionFinancial derivatives

Derivatives: A $700+ Trillion Bubble Waiting to Burst?


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$ billion 2008

The Global recessionImbalances: Surplus countries



$ billion 2008

The Global recessionImbalances: Deficit countries



Agenda






How it affects MarketingThe Marketing cycle



How it affects MarketingAdvertising to Sales ratio



How it affects MarketingThe Profit cycle



How it affects MarketingAdvertising to Profit ratio


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Downward pressures on spend

• Revenues reduce

– Implies lower spends for the same Spend to Sales ratio

• Customers become more price sensitive

– Implies margins and Gross Profits reduce

– Implies lower spends for the same Spend to Gross Profit ratio

• Media costs reduce

– Implies less spend required to obtain the same impact (GRPs)


Upward pressures on spend

• Greater switching in the market place

– Customers are less loyal and more opportunistic

– This is a chance to attract new trial purchasers

– But it will need new marketing spend

• But, in the short-term, the balance of spend may change:

– Away from brand building

– Towards “Call to action” & “Point–of-sale” messages

– Especially to communicate discounting, promotional offers, New Product Developments


Agenda






Reduced revenues

Downward pressures

Reduced profits

Lower media costs

Upward pressures

More switching –less loyalty

New trial purchases

Discount, promote,

NPD

Riding out the cycleSummary of spend pressures


Riding out the cycle

Trough•Plan for the upswing•Evaluate priorities•Set optimum budgets for the cycle•Take advantage of low media rates

Downswing•Cut spending on brand•Maintain spending on profitable short-term marketing

Upswing•Increase spending on brand•Maintain spending on profitable short-term marketing

Peak•Plan for the downswing•Evaluate priorities•Set optimum budgets for the cycle•Beware being locked into high media rates


Agenda






Professional bodies united over need for action- Market Research will provide vital strategic answers


So is this business as usual?

• NO

• Different mix of research answering new questions

• Clients and research firms need to work together defining this new research agenda

• Return on Ideas report provides checklists to help define the new research agenda


Return on Ideas report – Setting the New Agenda for Market Research

• More than 100 organizations talked candidly about what works effectively or not

• Some are much better at demonstrating and improving marketing’s value than others

• Best cases marketing is the beating heart of growth and the driver of performance

ACTIONABLE RECOMMENDATIONS

• Key questions for discussion

• Checklists

• Case examples


Return On Ideas– the infinity model


An Action Plan for Marketing ResearchSpecific action points

• Imagine

– Spend for the next phase of the economic cycle

– Where to cut spend and where to increase it

– New mix of consumer spending

– Product innovations and portfolio realignment

• Predict

– Demand, Revenue, Profitability

– Taking into account best estimates for the economy

• Demonstrate

– What has worked, what has not worked

– By type of spend

– By product and region


IMAGINATION CHECKLIST

• Can we really afford NEW STUFF?

• Are we hunting for AFFORDABLE ALTERNATIVES?

• Are we doing TOO MANY marketing activities or TOO FEW?

• Do we have the right MIX of affordable marketing activities and ideas?

• Are we PAYING TOO MUCH for Ideas and have we sought cheaper sources?

New mix of Researchwill help providevital answers


PREDICTION CHECKLIST

• Do we insist on rigorous predictions of the financial contributions of all new marketing ideas?

• When we predict, do we do enough:

– Historical analysis

– Testing and experimenting?

– Observing customers?

– Searching for analogies with existing situations to provide clues about how the future will unfold?



DEMONSTRATION CHECKLIST

• Do we insist on post-implementation reviews of every marketing prediction?

• Are we using good practice analysis methods to link marketing activity to customer activity?

• Do we have financial models linking customer activity to sales and profit figures?

• Do we investigate cost-efficiency and drive down waste, scrap and re-work?



NEW RESEARCH PRIORITIES FOR RIDING DOWNWAVE

LESS

• Soft Insights

• Brand Tracking Studies

• Image and Awareness

• Brand Positioning Research

• Nice-to-have studies

MORE

• Hard Edged Sales & Churn Analysis

• Depth Research on Consumption

• Pricing and promotions studies

• Econometric Modelling

• Customer Acquisition Cost Analysis

• Media Cost Optimisation

• Conjoint and Product Choice Models

NOT: cutting costs or quality


PUTTING IT INTO PRACTICE

• Keep calm and carry on researching

• Take the time necessary to define the new agenda –don’t let finance force it on you

• Use the Return on Ideas checklists to guide discussions between clients and research firms on the new priorities

• Run workshops to define new priorities for research


IT’S FREE

DOWNLOAD IT FROM

www.Demand-Chain.com

KEEP CALM AND CARRY ON RESEARCHING

09 05 riding out the economic cycle

Documents

new marketing

marketing spend3

marketing cyclesource

marketing advertising

marketing research specific

brand shortterm marketing

bryan finn

best cases marketing