Slashing the marketing budget can be bad for a business’s health. While cutting the advertising spend may seem like an easy way to quickly reduce costs, it can have the opposite effect.

 

Removing a brand from regular view can mean customers forget about it when the upswing comes.

 

Of course there may be times when cutting the marketing spend is called for but experts say any reduction should be proportional with what the industry is doing.

 

There is also a need to finetune the marketing message. In the mining supply space over the past year or so the message has tended to be more about the availability of services. With the demand that the recent mining boom created, that was enough. Customers just wanted to know they could get relatively timely access to goods and services.

 

With the boom over that has changed. Customers’ needs are different. This means a marketer has to understand what the customer wants and come up with an appropriately tailored message.

 

It is also a good time to be monitoring the marketing budget to see what activities work. Having that sort of empirical data can help marketers protect their budgets.

 

According to media specialist OMD, which represents companies such as Caterpillar, there is a range of research to show that brands can endure and even prosper through a downturn.

 

“A UK seminar held in July, three months before the world financial crisis began, investigated the most profitable response for advertisers during an economic downturn,” the firm says in a paper it prepared for MiningNews.net sister publication Australia’s Mining Monthly.

 

“The seminar, whose proceedings have been published by [UK advertising agencies professional body] IPA, proves that it pays to advertise during a recession.

 

“Australian research by Milward Brown supports these UK findings, showing that budget cutting is liable to reduce consumers’ ‘bonding’ with the brand. Cutting budget in a downturn will only defend profits in the very short term. The longer-term improvement in profitability is likely to greatly outweigh the short-term reduction.”

 

OMD goes further, arguing that buying “share of voice” is effective in terms of both cost and branding.

 

“The heightened share of voice leads to increases in consumer preference and in sales and profitability post-downturn,” the company says. “It is better to maintain share of voice at or above share of market during a downturn. Ultimately the brand will emerge from a downturn weaker and much less profitable if not supported.

 

“If other brands are cutting budgets, the longer-term benefit of maintaining SoV at or above SoM will be even greater. A recession provides a window of opportunity for inexpensive gains in market share for those brands that increase marketing investment during this time.”

 

Getting the message right is also important.

 

“Brands that show empathy will also go a long way right now,” the firm says. “All the car manufacturers are not in a great position at the moment. The current Holden ads do make some effort to empathise with their line ‘Holdens are tough but Australians are tougher’. To some it may be a bit soppy but it does acknowledge tougher times.”

 

Marketing Centre managing director Michael Smith agreed that getting the message right was crucial.

 

“Companies need to recalibrate their thinking about how they go to the market,” Smith said. “What they are selling is probably changing a fair bit. For many it was the amount of availability.”

 

Smith said mining houses had been prepared to pay virtually whatever it took to get access to services. Just saying a company was available was often enough to secure a lucrative sale.

 

“Now that there will be more supply of services [due to the downturn], the power moves from the seller to the buyer,” he said. “The marketing needs to change accordingly.

 

“The supplier needs to have the capacity to understand what has changed with its potential customers. How would they see you versus your competitors? Then, how are you going to configure your offer and sell it?”

 

Smith said he had seen these types of supply and demand changes through many past boom and bust cycles.

 

“The interesting thing is it was a very fast switch this time,” he said. “Companies will be destroyed and fortunes will be made.

 

“The companies that will adapt fastest to the new conditions will make the fortunes. They may not bank it now but they will when the upturn comes.”

 

A benefit a number of mining suppliers will have due to the downturn is access to more management time. Previously it has been a matter of all hands to the pump just to fill the large order books most companies had. Executives have a little more time these days.

 

“Companies will have more executive time capacity to spend on some of these marketing issues now,” Smith said. “They can undertake a proper analysis of what the situation requires.

 

“The person with the best insight into what the real client problem is will have the best chance of winning the business.”

 

This story was first published in Australia's Mining Monthly magazine.