During a Recession, Direct Mail delivers Profits and Market Share
Mail better, not less
Fear of economic turmoil can kill the momentum of any growing business. The mental distraction alone can be paralyzing to upper management decision making. Many find themselves tossed between cutting marketing budgets, anticipating the worse is yet to come, and staring at the competition that’s muddling in the same insecurity.
The fact is that businesses must evaluate their previously set goals, and adjust their marketing strategies to meet or exceed these goals. Those businesses which put their head in the sand and wait out the cyclical nature of the economy will likely miss the opportunity to dramatically increase market share. Integrated direct mail advertising should be used not only to guard “higher-value” customers, but to also win new customers from less aggressive competitors.
It’s been shown time and time again that businesses that maintain or exceed their market budget not only increase their profitability, they also create the opportunity to absorb a portion of their competitions customer base. The direct mail industry is long sought as the recession proof business. Many businesses utilize the obvious benefits of such a targeted medium in both bull and bear markets. They do it because of its predictable nature and its pinpoint targeting accuracy.
In short
When businesses stop advertising, their brand awareness diminishes rapidly. The appeal they’ve once enjoyed is difficult to reignite as the market rebounds. Meanwhile, those businesses which make a decision to advertise in the face of adversity capture the hope of new customers.
Our goal
BB Direct works with clients in helping them with all the possibilities (and limitations) of direct mail data acquisition. We can help you evaluate your previous campaigns, help make smart adjustments for future campaigns, and think through the data strategies that are many times the difference between red and black.
Below are our recommendations for increasing profitability and market share. We hope these points are helpful to your business, no matter which industry you are in.
Re-evaluate your business marketing proposition
It’s important to understand that potential customers (both consumers and businesses) respond differently during recessionary times. They become more discriminating in their purchase decisions and more responsive to a different type of message. Advertisers should not assume that the same audience will respond the same to the same message and communication.
This is an important point to remember in that during a recession, new customers may come from difference places than before, prospects that were once non-responsive may become responsive, and customers loyal to your competition may take more notice to your business with the right message and communication. This is where we want to focus.
To start, let’s look at a few basic questions about your current marketing:
Question 1: Is your current message congruent across all mediums?
When evaluating the choices for communicating to your audience, be sure to say the same across all mediums. It’s proven to be more effective to reinforce the same message over and over again, than is it to list different reasons or benefits. Consider your competition and how they position themselves. What is their selling point and how do they compare? If one of the many reasons for buying from you is also your competitions, the prospect must choose who has connected better. It is likely that your competition that stays focused and on point repeatedly will likely gain the business from you, or visa versa.
Question 2: Is your current value proposition promoting product or service value?
Stay away from boasting you are the lowest priced provider. Lowest priced leaders are often times viewed as always being lesser value. While you must consider pricing your products and services competitively, businesses that focus on price as their primary selling point mislead their customers into believing that your lower price replaces the product and customer service value. Instead, you want to appeal to the value your clients receive in dealing with your company.
Question 3: Are you appealing to the emotions of your potential customer?
If so, change your focus on product or service value, not emotion. Most everyone during an economic recession is experiencing some level of frustration or downright financial hardship. The process of accepting this new lifestyle is sobering to the most spirited individuals. Now is not the time to play on the soft spot of your audience. Stay on course with the product value proposition and make a strong call to action. Make your message clear and concise.
Don’t bury your head in the sand
Too often, business leaders become paralyzed with the “shock and awe” of how fast their reserve dissipates during a market down turn. Next quarter projects are down with no plan to reverse the trend. Sometimes, big change is necessary for navigating your business through rough times. Sometimes it requires laying-off employees, dropping products lines, cutting back on a variety of perks, and firing unprofitable customers.
One school of thought is to treat your business like an asset. Here the businesses marketing expense is a function of revenue from the previous year. If business is down, the marketing budgets are cut. In doing so, sales revenue usually continues to drop but hopefully, profit will be recouped when the market turns.
The other school of thought is to act. Business leaders look at the total market potential for their product or service. They take note of the competition that’s cutting back in certain customer segments and why. They set goals to absorb these vulnerable customers to boost profit and market share.
School of thought
Your business as an asset
One school of thought is to treat your business as an asset by cutting expenses to increase profits. Running a business as an expense during a recession is not recommended. You will likely lose valuable customers to more aggressive competition and have a difficult time gaining them back in the years to come.
Your business as a vehicle
The other school of thought is to treat your business as a vehicle. This means looking for opportunities and allotting the appropriate expense needed to exploit these new opportunities. During a recession, you should be looking for opportunities to invest in, gain market share, and increase profits in both the short and the long term.
This second school of thought considers not what marketing dollars are allotted based on the previous year’s profits but in accordance with the need for reaching those new customers. Scrap segments of your business that are less profitable and redirect your dollars toward fostering these new business relationships.
The first approach works in a growing economy because the assumption is that doing the same begets the same. During a recession, this logic does not work. Doing the same begets different. Buyers purchase less of one product and more of others, they are more discriminating, and their loyalty dissipates. They make purchases based on a whole new set of conditions and respond differently to the same offer. This is why the second approach is imperative to keeping the customers you have while at the same time finding new ones.
Strategy – Value proposition across all mediums
To put it simply, avoid gimmicks or emotional appeals in all your advertising mediums. During a recession and in the midst of all the advertisement “clutter”, businesses should focus on relationships between customers and brand to keep and win business. It’s far more appealing to communicate the benefits and advantages of your product or service. With direct mail, use hard hitting copy with simple but convincing language, offers that are hard to pass up, and a strong call to action. Focus messages of benefits and ROI. Prospects are looking for as much value as possible in a weak economy and direct mail is an excellent medium to deliver that message.
Strategy – Adjust the recipe but keep cooking
There are several logical reasons for not cutting your advertising budget during a recession but the primary reason is that recouping lost customers after loosing them is more expensive than protecting them. This holds true when the economy is doing well, but especially when in a down market. Losing customers to competitors during a recession is a difficult trend to reverse.
The focus should be placed on reaching marketing and communication goals over keeping within budget. Your budget should be set based on what you are attempting to accomplish, albeit fostering a richer brand/customer relationship, or hunting for prospects that might be lured away from your less aggressive competitors. The key is to understanding how your previous customers and prospects will change their view during hard times. Who do you currently serve? Will those you currently serve change the way they buy? If so, are there others markets that present themselves? Direct mail is an important medium to surveying and identifying your current customers, but also in establishing the optimum message. It’s measurable and predictable, and easily replicated. It’s quick to answer tough questions. With direct mail, you can fail fast and evolve.
Strategy – Renegotiate media vendor agreements
Some of the best media rates occur in an economic slowdown. The best strategy may not be to negotiate the lowest possible rates but rather to encourage a cooperative relationship with the media. Share information on your budget because when the media is creating special offers you are more likely to receive valuable deals.
Pricing should be not on the lowest cost today, but fair cost for the long term. Prices will increase eventually, and when the time comes, you’ll be enjoying lower rates and a stronger relationship with the media you rely on to deliver your advertising messages.
Strategy – Target low hanging fruit
The low hanging fruit are those prospects that are already buying your product or service, just not from you. Monitor your competitors and look for opportunities. Find those cutting back and focusing on that segment of the market to boost market share.
Focus on your metrics. Know which target segments are most responsive, which offers generate the greatest interest, and so on. Spend every ad dollar carefully. Re-examine your marketing mix to ensure it is the most cost effective. Be sure you balance your marketing on customer retention and new client acquisition. It’s more expensive to rebuild your market share than it is to maintain it.
During a recession, priority to goods and services change depending on what goods and services you are offering. Consumers once loyal to brand begin to question what goods and services they buy rather than from whom.
A recession can help you strengthen the position of your business in your marketplace. In fact, it may well be the perfect time for increasing your investment in advertising, taking market share from your competitors, and even introducing new products and services. If you can afford to be aggressive, you’ll find there may be no better time than during a recession to take market share away from competitors who are in a weakened position.
Strategy – Set realistic goals
Lower than average return on marketing investment should be anticipated in many markets. Advertising should not be regarded as a drain on profits but as a means to achieving objectives. An adjustment to expectations is necessary before executing any campaign initiatives. Whether you are introducing new products or services or campaigning to embolden relationships you currently have with profitable customers, your goal should be to set tangible markers for success.
Strategy – Long Term Planning
Maintaining or increasing your advertising may not hurt your bottom line short term and increases your profitability long term.
• A recession provides a prime opportunity for increasing your market share, so monitor your market share, not just your sales volume.
• Balance ad spending between long-term consumer motivation and promotion for short-term sales boosts.
• Implement a media relations strategy that will strengthen your relationship with key media and provide long-term financial benefits.
• Don’t hesitate to introduce well-conceived and properly marketed new products when your competition is weakened.
Before you invest in your direct mail campaign, talk to one of our helpful consultants here at BB Direct.
Disclaimer
This strategy blog post is for those businesses which will endure beyond the natural economic change we are currently facing. There are many businesses that will not, or cannot bring about the changes necessary to ride through a recessionary period. I make this point because for many businesses, a minor loss in sales revenue is too great to overcome and they are already on the brink of collapse. For these businesses, severe changes must be made in order to maintain a going concern. This strategy blog post is not a prescription to remedy failing businesses, rather a supplemental to those direct marketers who are able to make positive changes to their marketing plans and can afford to test a variety of campaign opportunities.
Tags: Advertising during a recession, Economic recession and direct mail, Mailing better during a recession