Ad its chips?
During the recession marketing budgets have migrated onto the internet at a rate of knots. What has the impact been? EN investigates.
Every marketer knows the story of the cereal wars of the Great Depression. When America entered the downturn Kellogg’s and its biggest rival, Post, were neck-and-neck in their command of the cereal market. Unaware of how consumer demand would be affected Post cut back its spending and hoped for the best. Kellogg’s, on the other hand, doubled its advertising budget and moved into areas of marketing it had never considered before and invested heavily in pushing its new products.
By the mid-1930s Kellogg’s profits had risen by 30 per cent – and when Post was ready to return to the market Kellogg’s had it cornered. The firm’s marketing strategy during the 1930s is credited with turning it into the worldwide industry giant it is today.
The moral of the story – as every marketing professional in the country is eager to point out at the moment – is that those bosses who automatically slash their marketing budgets in a recession are doing themselves, and the growth of their business, a disservice.
But the experience of the marketing firms EN heard from would suggest that since the credit crunch hit in 2007 Britain’s businesses have reacted as Post did – erring on the side of caution and hoping to survive rather than launching an aggressive marketing strategy in order to grab a bigger share of the market.
Michael Di Paolo runs brand design consultancy Studio North in Manchester. He says the marketing industry in general has had a tough time of it over the past couple of years. Fee levels and outsourcing mark-ups have come under scrutiny from clients, many businesses are cutting budgets and tender opportunities are becoming so oversubscribed “it’s hardly worth bothering”.
Luckily for Di Paolo and his peers there are still some of the “more entrepreneurial types” who have realised that, if markets are shrinking, in order to achieve growth a bigger market share needs to be obtained “and that usually means more marketing budget and resources,” Di Paolo says.
One such business is Parasol – the Warrington-based outsourcing group headed up by founder and chief executive Rob Crossland. Last year Parasol’s marketing manager Susie Lee- Kilgariff instructed Studio North to carry out a rebrand of Parasol and its sister company ClearSky Accounting to bring its branding in line with its reputation as an “entrepreneurial and fast paced” business.
“I had to do a lot of hard work to make sure the company understood why we should spend that money when we were in the middle of the recession and we were chasing sales as hard as we were,” Lee-Kilgariff says.
“But marketing experience tells you that companies who invest through a recession always come out stronger at the end. I just had to make sure we did it very cost efficiently.”
Parasol experienced an eight per cent uplift in sales and a 28 per cent increase in customer reactivation in the six weeks following the rebrand. “It would be difficult to attribute all that success to the rebrand but it will definitely have had a positive halo effect,” she says.
Twelve months ago Parasol took on its own in-house marketing team to replace the external consultant that worked for it on an “ad hoc” basis. Lee- Kilgariff says Parasol’s decision has paid off.
She explains, “External consultants never get under the skin of the business. With a dedicated team you get discipline, planning, a long-term strategic view rather than a short-term, quick campaign to get some sales in. Before it was a bit of a black hole – you don’t know what they’re doing.”
And there are good – and jobless – marketers out there for the taking. Michael Di Paolo says recruiting last year was “like being a kid in a candy store – I picked a real diamond”.
It’s not all bad news for the nation’s marketers. The industry has been buoyed by significant developments in digital marketing – a trend that’s reflected in Studio North’s revenues. Di Paolo says digital turnover increased 16 per cent in 2009 compared to 2008 and is up 84 per cent on 2006. Offline revenue rose five per cent in 2009.
He predicts that digital will bypass offline in 2010 for the first time since Studio North started trading eight years ago: “Despite a couple of recent high-profile cases [search specialist Latitude, which has been bought out of administration by its management and private equity backers in a pre-pack, and Flame Digital, which entered administration in January] digital has by and large bucked the negative trends elsewhere.”
Wealth management group Kleinwort Benson’s recent UK Entrepreneurs Survey showed that many SMEs are looking to build their online presence as they work to cut running costs and use marketing budgets more efficiently.
Newly emerging social media are at the centre of many businesses’ planned activities. Forty-two per cent say they would use LinkedIn, the same number Twitter, with Facebook and YouTube polling 38 per cent and 36 per cent respectively. The incredible rise in online media means it’s possible to monitor the impact of a marketing strategy – whether through pay-per-click campaigns or click-through results – and, when money’s tight, results are paramount for business owners.
Glen Berd runs online footwear business lovethoseshoes.com. She says the recession has done much more than simply affect marketing budgets: “Even if you have the money to run expensive campaigns, consumers don’t seem to be as reactive and impulsive as they were before the recession was hyped.
“As a small business we naturally work around traditional and expensive marketing strategies anyway. However, we have needed to be more proactive with our online efforts over the past year in order to drive traffic to lovethoseshoes.com.”
Berd has invested in online marketing tools such as Google Adwords and says she has put “a lot of resource” into social media campaigns. She says, “The beauty of online marketing is that it is instant, although you can’t beat a full feature in a national or weekend supplement. Online is full of growth and opportunity.”
Manchester-based IT hosting provider UKFast – which, incidentally, knows the value of offline marketing and is lead sponsor of rugby side Sale Sharks – has led a number of roundtable discussions with some of the region’s entrepreneurs and business experts to share advice and ideas on how to grow a business in 2010. Lawrence Jones, UK Fast’s MD, says the resounding message from entrepreneurs on marketing is one of flexibility.
He says, “The internet is the most potent marketing channel for the foreseeable future. However, businesses that combine the skills of an internet marketer with a thorough knowledge of their target market will grow the most.”
At UKFast’s most recent roundtable discussion panelists discussed the siginificant financial benefits of social networking.
Supporting computer maker Dell’s recent revelation that it generated $6.5million through sales of PCs, software applications and accessories using Twitter, they agreed the microblogging site was a primary traffic driver to company
websites and an essential form of free, immediate advertising.
With a worldwide Facebook audience in excess of 350 million users and Twitter growing at a
reported annual rate of 1,382 per cent, the panellists admitted that their marketing campaigns now focused heavily on linking content across numerous social networking sites.
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