Marketing communications services are usually one of the first things to get cut in a down economy, and also one of the last things to come back (image: clearing the gate by cmaccubbin). The current freeze (more like slow flow, as contracts are starting to come in again) is something many executives and I talk about on the back channel. Most want to know when it’s going to end. I wonder if it is, or if this is just the new competitive reality.
We’ve had a big party over the past decade on credit, and now it’s time to pay the debt. In my opinion, and based on many reports I read, this downturn seems to be more of a severe correction than a true recession. Meaning this contraction of markets is forcing expenditures to be made on hard cash as opposed to speculation and credit. Even when credit flows again, organizations will be less quick to use credit to fund their business operations. In the end, that’s a good thing as businesses will be stronger for it.
In the short term — meaning the next couple of years — this type of hard competitive business environment will continue for marketing services companies, consultants and job seekers. Contracts are now starting to be doled out and some markets are starting to do better, but they are much more competitive. As the bottom becomes more secure over the next few months, the more risk adverse and those that know they have to market will also start spending. A slower ebb of business is resuming.
Some companies will take a long time to return to marketing. Why this is, I don’t know. It’s really hard to make money if your customers don’t know you’re out there. But in every down economy, some companies do this, and they pay the price in market share. What’s important is for agencies and consultants to identify these companies quickly and move forward to work with smarter organizations that understand the value of marketing services.
To effectively compete, marketing services companies and consultants alike will have to be much more customer focused. Their offerings — as many have discussed — will need to be less experimental, and more ROI oriented.
The sharp and nimble will not only make it, but they will thrive. They will capitalize on the opportunity presented now. They will offer the right kind of marketing services that distinguish their organization and create meaningful growth for their clients and partners.
It’s an interesting time. Welcome to the new competitive reality.
Geoff, you have framed the situation very clearly. The onus for marketers is to prove their value to the enterprise. And that is done by showing tangible, measurable results, which in the past has been challenging to marketers, especially in the PR/communications realm.
However, web-based technologies now offer the marketer the ability to better gather, store, analyze, share and act upon data. Data drives marketers, marketers drive sales, sales drives the company. Maybe this is simplistic, but neither can it be dismissed.
Marketing’s responsibilities in the past have been so diverse that these tools were never developed previously – it’s was far easier and necessary to automate accounting, operations, HR, and sales – now, however, Enterprise Marketing Management (EMM) platforms and many other toolsets are being implemented that are helping marketers plan, execute, and control their operations.
There is a lot of noise out there and most marketers I speak with are both confused and overwhelmed about the choices they have to make in transforming their organization. The “new” marketer must master technology, analytics, and linguistics – in effect be more of an engineer than an artist. That will be difficult for many who lead marketing efforts within a company, but the need for more visibility into and accountability with marketing operations will require adoption of these tools, many of which are available and affordable to the smallest of companies.
Ultimately, like any operation, marketing will have to become more efficient in order to achieve its measurable objectives; it will have to invest in its ability to process data, which now constantly flows in via our internetworked world. Information superiority is a competitive advantage which can enable a company to be “sharp and nimble” and “distinguish their organization and create meaningful growth for their clients and partners.”
The “new competitive reality” will continue to be painful – more so for the marketers/companies that don’t adapt and transform their way of marketing.
I completely agree that what we are experiencing is an extreme correction, rather than a true recession. I wish more people understood this. Business cycles are pretty simple things: the further up you go, the farther down you fall on the tailend.
I also agree with you on the marketing front. Right now is the golden opportunity for some smart companies to take advantage of their competitors’ shrinking marketing budgets. What I do find fascinating is that we’re not just experiencing a economic downturn which has shrunk marketing budgets, but also the evolution of marketing itself. No, I’m not talking just of social media…but the internet in general. The internet is quickly becoming the main entertainment medium, and companies who are used to just using traditional channels (tv, radio, print) are suddenly finding less success through them, and are having to evolve to where consumers now spend their time: the internet.
Coincidentally, the internet is the perfect place for smart marketers during this economic downturn, as the internet allows for an unprecedented level of tracking and accountability.
Interesting times indeed, and good thought-provoking post.
Joe and Sean, some additional great insights to this post. Thank you for taking the time and adding such strong in-depth analysis.
Ironically, in bad times, the first budgets to be slashed are the very budgets that when utilized correctly, can significantly influence sales. While the paradigm continues to shift, it’s critical for companies to recognize the opportunities that are being presented and to carpe diem. As you and your other readers have already pointed out, if leveraged properly, the market is ripe for innovative, customer-focused marketing. Still, an important lesson in this new marketplace is that old marketing strategies shouldn’t be thrown out entirely, just massaged to meet changing needs.
I agree with Goeff, this is more than a recession. It might even be a depression. And understanding that big picture is crucial to informing personal and career decisions.
Every so often, the capitalist system crashes because its pieces fall out of alignment with each other. The system doesn’t come back together until those misalignments are fixed.
In 2009, macroeconomic issues need to be addressed (e.g., Chinese currency manipulation in a free trade environment helped cause this crisis). Hedge fund trading (which tipped us into crisis) is ripe for new regulation. The banking collapse needs to be cleaned up (toxic assets off balance sheets) before capital flows and industries function properly again. And after that is done and the economy functioning again, consumer and business confidence needs to be restored. It’s going to be a long slog.
Another big picture item is that this crisis is shifting the US to a more European-style economy, with a larger share of GDP from government spending. Implication: no customer buying decision = no need for marketing/ROI in that sector. 8% of the economy shifted in this direction via the stimulus bill.
A third point is that the rate of economic growth is forecast to be lower over the foreseeable future regardless of how successful the stimulus and various bailouts are. The loss of credit-driven growth will be long-lasting. And the large deficits will produce inflation within 5 years or so.
A fourth point is that the economy has bled trillions of dollars in value. Our economy has in a sense been blown back 20-25 years.
I say this to caution against anyone limiting their analysis of this economic climate to just microeconomic factors affecting a single industry. The brutal truth is that many of the sharp and nimble will not survive in their current lines of work. There is less pie to go around and less ability to expand the pie.
Goeff writes about “the cream rising to the top,” the best marketing agencies chasing the best clients who are the fastest to embrace this new reality. That evolution is essential and will work for many people.
When the large steel plants closed in the 1970s, many steelworkers moved into new lines of work. Boutique specialty steel plants became the winners in that industry — but it was a smaller industry. The same is likely to happen to the marketing industry based on the larger changes in the economy.
Sometimes the sharp and nimble see better opportunities elsewhere.
Here are a few thoughts:
A marketing background is a great skill-set to take to self-employment for those who see an opportunity to make the leap. 1Q2009 will go down, in my opinion, as a big quarter for new business formations (bootstrapped, by and large).
Much of the job-hunting advice that crosses my path emphasizes going after what you love to do with passion because that will differentiate you in this tight market.
Seth Godin recently blogged about his “alternative MBA” students’ list of 998 new business ideas. A lot of great ones for marketing mavens.
There is a growing industry in transforming developed country products and services for developing country markets. The Gates Foundation just put over $12M toward mobile payment systems in the developing world. Consumers in the US are tapped out — but consumers overseas are underserved. Many opportunities.
There are no guarantees in this economy. The downturn could end in a few years, linger for decades, spark armed conflict, no one knows.
It’s not the time for conventional thinking — about your career or about your life. We’ve all lost ground. I think that emotional preparation for these eventualities (facing the bad) is actually quite freeing. It frees you to not just follow your industry but to follow your own intelligence as well as your heart.
Standing still is dumb — and working hard to evolve in your industry is smart.
But when there is a lot of uncertainty around you, following your own sense of opportunity, your instincts, heart, gut, or whatever you call it, is the only reliable guide there is. Check in there first and often.