Written by: Daniel Stitt
Exploring the learnings from previous recessions and using various real-life examples of strategy selection and corporate performance, this video will guide financial services businesses to growth and success during a recession with smarter, integrated digital marketing.
Hello, my name is Danielle Stitt. I'm the Chief Executive of BlueChip Communication. And today I'm going to talk to you about what do we do with marketing and how do we market during a recession. I certainly get asked quite a few times by marketing officers in particular about how do they justify continuing to spend on marketing? How does marketing not get cut and budgets get cut during a recession? So I'd like to run through a little bit of that based on what we've learned in other recessions, most recently 2008, but going back to the 2000 dot bubble, the pull back in the nineties, and even further back from that using data and case examples of companies that cut back, companies that really went hard, and companies that found that middle ground.
So I'm going to read to you a little piece from Harvard Business Review, which was written in March, 2010. It said "Almost all business leaders, reluctantly admit that the current crisis also marks an inflection point. The world after it is unlikely to resemble the one before it. Their priority, when they get a moment’s respite, must be to remake their organisations to cope with the “new normal.” But CEOs, like generals in the heat of battle, are so busy tackling short-term priorities that the future is obscured by the fog of war.”
That was March, 2010. It feels like it could have been written this year with the COVID crisis that we're all experiencing right now. In some ways that made me take heart that there is precedence. We have been through crises before and we will come out of them. And there is a way forward that when so much is uncertain, that we can look to for guidance now in this time.
One of my favourite quotes, which again, I'm going to read is by an author who's called E.L. Doctorow, who wrote, "It's like driving at night in the fog. You can only see as far as your headlights, but you can make the whole trip that way". And some days I feel like I'm very much driving in the fog and I see in the faces of my clients, they are feeling very much like they are driving in the fog. But we do know our destination and it's somewhat in mind. The analogy I kind of like is to think of ourselves as pilots with a little bit of autopilot. We hop into the seat at the front of the plane. We plug in our coordinates for where we want to go. And then we just start moving in that direction. And it may mean that we need to take stock and look at the autopilot program, make sure that we're still on track for Los Angeles and not heading to Dallas, or it may mean that we need to look up when we have a moment of clarity to say, do we still need to land in Los Angeles or does it now make sense to land in Dallas?
With that in mind, I also looked back at some case studies and some data, as I mentioned from previous recessions to see what we can learn from businesses that have done well and come out of hard times better than others. And what was it that sort of made the difference between the companies that thrived and those that only just survived or sometimes did not survive? Again, looking at Harvard Business Review, and I can share links to these articles if you want to have a look at them for yourselves. There was two or three types of companies. There were the ones that just aggressively cut costs and really went into cash preservation mode. There was the opposite end of the spectrum who really doubled down and got really aggressive with their spending. And then there was the middle ground organisations that found that nexus or the right way forward between those two extremes, playing both offensive and defensive in the right order.
What did it take to grow those well. An example of a company that was the former one, that really significantly cut costs was Sony. Its cost reduction target back in 2008 was $2.6 billion. The focus there was including closing several plans, 16,000 jobs were cut. They delayed a lot of investment decisions, including an LCD manufacturing plant in Sweden. And it resembled very much what they'd done in 2000 as well with the workforce cut by 11%, R&D expense by 12%, and capital expenditure by 23%. It'd help them increase their profit margin in the short term, but over the long term, others were spending and investing in R&D in India, investing in marketing and the likes of Amazon, Microsoft, and Nintendo, and Samsung certainly overtook Sony when the economy started to pick up after 2010.
At the other end of the spectrum of where a company was a little bit too aggressive was Hewlett Packard where Carly Fiorina, the then CEO asserted "In black jack you double down when you're having increasing probability of winning. We're going to double down" and this was coming out of the 2000 recession. They embarked on a massive restructuring program, made the largest acquisition in history, buying Compaq for $25 billion, increased R&D expenditures by 9% and spent $200 million on corporate branding and $1 billion on expanding the availability of information technology in developing countries. These initiatives drained the organisation and the top management's attention was certainly spread too thin. And when the recession ended, the company found it tough to match the profitability levels of IBM and Dell. By 2004, HP's earnings at 8.4% had slipped below IBM's, which were at 16.8% and Dell's which were at 9.3%.
The research found the sort of markers most successful companies coming through recession exhibited, what they called pragmatic companies. And this is probably, I think, best explained by Jim Collins in his Good to Great research around what he calls the Stockdale paradox. For those of you that aren't familiar with, James Stockdale he was a former vice president candidate who during the Vietnam war was actually taken as a prisoner of war. He was there for seven years. And you can imagine as a prisoner of war, he suffered all sorts of hardships and deprivation. Jim Collins interviewed Mr Stockdale and asked him: who survived, who actually came out of the prisoner of war camp and who perished. James Stockdale said it was actually the optimists which didn't make it. It was the optimist who said, "we'll be out by Christmas" and Christmas would come and go. "We'll be out by Easter." And Easter would come and go. "We'll be out by Thanksgiving", which would come and go, and then they'd be back to Christmas. And essentially they died. They lost hope. They died of a broken heart.
What differentiated the people who survived including James Stockdale was that they were able to face the harsh reality - that they were prisoners of war in terrible conditions, but they never lost faith that that they would prevail in the end, which is different to the optimist who was thinking short term, pinning hope on certain key milestones, which they really had no control over.
It's the discipline of what we call confronting the brutal truth of your current reality but knowing that there will be an end to that. So we're kind of in that moment. Being able to say we are in a recession and we do know that things are very tough and very tight, and it's easy to look at some sort of cost cutting, sort of reduction measures is the way forward. But we do know because they are cyclical that there will be an end to this. We don't know when and COVID is certainly told us that it's really hard to have any control over the timing; just when we think things are picking up, Victoria goes back down into lockdown, second waves in Europe and the UK. So timing is not about control, but we do know this thing will end at some point.
What do we need to do? And talking to a mentor of mine, who's very experienced business consultant, he said, "You want to make moves on the no regrets decisions". What are they, what do they mean? What does a no regrets decision look like in this environment, particularly for financial services marketers and leaders? How are we going to implement those if I talk in sprints and working in those very fast moving environments, because I think that's what we all we're finding ourselves in right now. How are we going to help our organisations grow out of this? Not only survive, but thrive.
The companies during this recession, the progressive companies that developed new markets and invested in large assets and that invest in the technology that they know needs to be invested in, that they can see that that's where the future is taking their market or the audience. For us it might be investing in human capital for the first time in a very long time. We're actually in an employer's market where there are some really good people who are looking for employment. So it's a fantastic time to invest in your people and to upgrade the skills and the overall quality of your team.
And the other finding was that the progressive company stayed very connected to their customers and what was happening in the marketplace. We've certainly seen that during COVID - where tone-deaf marketing has just been totally lambasted, like it's just has no place now. It's a pretty unforgiving market, to get that wrong and to not listen to what's going on. And I think that in financial services, we've seen that play out quite a lot, particularly around governance of some of our larger institutions, where behaviour of senior executives is just no longer tenable. And we've seen that where a CEO actually has just been told to step down based on his internal communication and some of his actions. I think we're going to continue to see that, possibly we've reached a tipping point in corporate land, on what's acceptable and what's not.
You have to be aware of where the market's at, more so possibly than ever before. I've always been a big fan of doing that and certainly do a lot of persona research. It doesn't matter how well I think I understand the market, I will always learn something when I actually go and speak to the end customer. And that might be about how they're buying, what they're worrying about, what is driving their world, what they're trying to achieve, where their head's at - sort of emotionally at the moment as well. And when you're operating in an environment such as the one we're in now, where people in a recession spend their money very carefully, they're much more likely to be saving and stockpiling cash than they are to be spending. Where as, as marketers and leaders, we need to have a high confidence that that's the right place to spend it. And for my 2 cents' worth, I always think it's worth actually staying very close to your clients, to understand what's going on there with them, so that it's not just hypotheses in a boardroom, it's actually backed by market feedback.
Looking at what Google are doing, they too have a marketing department and need to make good decisions on where they're spending their resources and they've for instance, had a look at what's going on with COVID and what is happening with the audience. And they're making much faster decisions about what's underperforming. So clearly they can track, as I hope all of us can track, what's working in marketing and what's not, and be able to have some confidence that if we're going to spend money in a channel, or on a campaign, or whatever the purpose is, that we are achieving what we need to achieve out of that spend. And that comes down to tracking and analytics and knowing what the right metrics are that we should be following so that we can make those fast decisions, and be continually optimising our spend.
One example that Google gave was a brand campaign. So a brand campaign seems, in some people's minds, possibly a little bit discretionary at the moment, but they had very clear objectives; what they wanted to do with the brand campaign and how they are backing that up with more lead generation and generating revenue off the back of that. But rather than just run the campaign nationally, they actually were aware of what was going on - as they had huge access to data as we all do through Google Analytics and buyer intent, they could see what was going on in their marketplace. And so they decided not to advertise nationally, but to spend in areas where they knew this campaign would have higher resonance, and this was to do with COVID-19, so they knew where the hotspots were at the time, so that the brand campaign would have a much greater impact where people were suffering, particularly within the pandemic.
So what do we need to do? And I've got four steps here, which you can also read in this blog post "How to turn a crisis into an opportunity using smart integrated marketing" that my colleague, Alex Cowan has written.
Step one is make it measurable. If we are to be as marketers, and I'm now talking to more of the CMOs and heads of corporate affairs, so if you're a CEO, either nod your head or block your ears. For marketing to be able to have a seat at the big table, if you like, we're going to have to prove that whatever we're spending on has a material impact on the business. I did read somewhere that essentially finance and numbers and commercials are the language of the C-suite, so as marketers, we need to be very good at talking that language. When we propose a campaign or are reporting on a campaign ask what impact did that have on the business? It's fantastic to reach a hundred thousand eyeballs, but what did that do? Did that drive X number of website visitors, which was why conversions and, you know, such and such flowing to fund inflow for example. How does that translate back to what the business is trying to achieve?
Step two is to define your buyer persona, and we've spoken a little bit about that. The couple of things that I like to emphasise in this is not so much just the demographics, you know, middle-aged mother living on the north shore, but what's going on with their psychographics, where is she at emotionally? What's worrying them, what's going on in their heads? - much more than just what can you see from the outside. And what I think is particularly powerful is developing what I call buyer personas. So if I'm looking to buy a new credit card or open a new account, or decide which fund manager I want to go to, or which super fund is going to make sense for me, then understand how am I going to go about researching that. Will I be talking to people? Will I be Googling it? What will I be looking for? If I have done that research, then what stood out for me? What was I really looking for in a superfund manager? Was it ESG? Was it really strong returns? Was it a very experienced track record? What is my buying criteria and how did the various brands deliver on that? Particularly when I'm doing buyer research for clients we are looking at asking questions about what was important to you and how did that brand sort of meet or not meet that and who else was doing a really good job that you looked at? So there's a huge vein of rich data to be discovered through doing that process and I know I'm labouring it, but I can't tell you how much more efficient it makes your marketing. If you understand those things, it just cuts out so much of the guesswork and so then you know what you need to be saying to your client, because they've told you what's important to them, where you need to be saying it. So if I'm at the initial discovery stage, I might be in Google. When I'm down almost going to decide mode, I'm actually on your website. All these decisions on where you spend your marketing budget actually become much plainer because I've understood from the beginning. The audience has told me, I don't need to guess.
Then step three, plan your outreach programs. Which channels are you going to use? What is the right content or topics to be putting out on those channels. Right from initial discovery down to, am I going to choose between superannuation fund X or fund Y and what I need to say on those? And how else am I going to decide, do I need to see testimonials? Do I need to see case studies? Do I need to talk to somebody? So have all that mapped out.
Then step number four is plan and execute that. You can't do all things at all times. So then what is the various flight paths you're going to have in place? When are you going to be doing various activities in market? When does it make most sense? Clearly you need to be listening all the time to market, either through comments on social posts or comments at the bottom of articles, on topics that you would like to be talking about, to see where people's heads are at. How you can continually be meeting those needs with the messages that you want them to understand about you. And measuring that - measure, measure, measure. And optimise - don't get too attached to darlings. You might think it's the best thing ever, but if it's not performing, and you've exhausted what you think is the possible things that you can be iterating on, whether it's a change in a headline or a change in a topic or changing the colour of the call to action button. Make your decisions reasonably quickly and move on.
One thing I think, if I go back to talking about what companies have done well during recessions, is that they did invest in research and development. And in a marketing sense, I see that as test and learn; little tests and learn programs. And Jim Collins talks about them as bullets and cannonballs. The story he tells is if I've found a pirate ship, trying to take on another pirate ship, I've only got a certain number of cannonballs and it takes me time to line up those cannonballs and fire them at the ship that I'm trying to take down. But I have bullets I can load up quite fast and I have more bullets. So I can fire bullets, which allows me to do little tests and to calibrate, you know, am I actually, with the gun pointed in his direction at this trajectory, am I actually going to hit the foreign ship. I can do all of that with bullets before I then load up the cannonballs. And rather than just wasting those cannon balls, I know that I've set the trajectory and the direction and the arc to be able to land those effectively. This is about having a couple of those small tests or bullets in market at all times, so that you know that you can then go hard when you hit the foreign ship with your cannonballs.
The last thing - I know I'm drawing a lot on Jim Collins here, I'm a bit of a fangirl - is step five: setting up your fly wheel. An example he worked on with Vanguard actually was to work out what it was that would drive their business and he talks about it in terms of a clock. So a flywheel, obviously is circular. From 12:00 AM to 6:00 AM is where you're simplifying and refining your process and your platforms, where you can iterate and you're getting some results out of that. And for Vanguard, that was like, okay, we're going to offer lower cost mutual funds, which was not a thing at the time when this was developed. And then from 6:00 AM to noon, so the back half of that circle, you're simplifying the process and you're teaching it, and you're seeing some results of that and you're reinvesting in what's working. And the flywheel eventually, you're overcoming that initial friction because once a flywheel is running, it takes very little effort to keep that wheel moving. So to go back to the Vanguard example, as lower cost mutual funds, which delivered the same returns for investors but at lower costs, which built loyalty, which helped them grow their fund. And then they could continue to offer or expand out the low cost mutual funds. And you can see then that, that just becomes a virtuous self-powering circle.
In conclusion, I think what I'd like you to take away from this is it is a really important time not to be cutting back your marketing completely. It is a really important time to be doing the things that you should be doing, setting up small tests and learns, making your team and your operations more efficient, investing where you know you need to invest - maybe that's in your people, maybe that's in your MarTech stack, maybe using AI to become more efficient. So that as we move out of the recession, you've also maintained presence with your target market and you haven't lost ground to any competitors who are in a land grab - if you go silent, they will be able to move into that vacuum. Don't create the vacuum, stay present, but do it in a really efficient and really mindful way and continue to track what's working, what's not working. Don't be afraid to make decisions quickly. Stay focused on what's in your headlights without losing sight of where you ultimately want to be, regardless of what speed bumps come across your road at any one time.
If there's anything more you'd want to talk to me about - I love talking marketing - I encourage you to reach out. I'm always available to talk through anything specific. Thank you very much and I encourage you to have a look at our website for lots of other resources.