Aligned Marketing Blog

My tiny slice of the world is sending me buy-signals and they're exciting to hear. What is your world telling you or, more importantly, are you even listening?

Steve
800-707-9150

On Monday we talked about golf and related it to your business: You have to play the ball where it lies in the same way you have to make business decisions based on today’s realities. Wishing for a better lie is silly.

Our economy is in the rough and, while most are slashing expenses, people and marketing budgets, some leaders are using this pre-recovery time to increase investments in marketing. In a recent BtoB Magazine survey, “2010 Outlook: Marketing Priorities and Plans Survey results, 11-16-09, 71% of those surveyed are investing more in their website in 2010 than they did in 2009.

In a separate study from Bain covering over 2500 companies, about 24 percent more firms were shown to “move from the back of the pack to the front of the pack,” with regards to sales and profits, during recessions than do during non-recessionary times. Do significant marketing investments during a recession make sense?

It did for Southwest Airlines and Wal-Mart (see Monday’s post). Both were noted in the Bain study for their vision and results but other companies have made smart pre-recovery investments as well. For example, the “Intel Inside” campaign was launched during a recession in the 1990’s. Before that, Proctor & Gamble invested heavily in Ivory Soap during the Great Depression and achieved spectacular results that lasted for decades. What is it that Southwest, Wal-Mart, Intel, Proctor & Gamble, great companies all, knows that other companies seem to miss?

It’s this, marketing investments that are consistent and aligned with your customers’ needs and aspirations are always wise investments. Now is the time to assess your customers’ needs, as well as your own strengths and goals, and invest.

Slashing marketing to survive in 2008-2009 may have been necessary but now you have to play the ball were it lies. What’s your plan for 2010 and 2011? Do you know what your competitors are doing? Who was weakened by the recession and who became stronger is important marketing intelligence. As the dust settles, where do you stand or do you even know?

A return to the pre-recession competitive landscape in 2010 is unlikely. The mammoth adjustments necessary for survival changed the playing field. You and your competitors were not affected equally and new options, most likely driven by technology and the web, are available to your customers and prospects. In every segment of the economy customers are beginning to look at products and services through a new, post-recession lens. How visible are you?

John Donahoe is CEO of eBay and to summarize what he said,

“It’s not about battening down the hatches and waiting for the storm to pass anymore than it is about betting big in the vague hope your hunches will pay off. Instead, it’s about executing what you do well better than ever before, making improvements, seeing the potential in new opportunities and, most importantly, having the vision to see beyond the immediate situation and taking action…“There is more market-share shift in turbulent times than there is in good times — more of an opportunity for a strong company to gain ground.”

Donahoe is right. You can’t stand over the ball forever. At some point you have to pick a club, commit to the shot and make an aggressive best swing. Are you going to play another round defensively, trying not to shoot over 100? Or are you going to play aggressively in hopes of breaking 90? It’s your choice. Take the shot.

Golf is my favorite game. You learn a lot about yourself and your friends on the course. There are a few life-lessons to be had as well. One of my favorites is, “You have to play the ball where it lies.”

Right now our economy is in the rough. That’s the bad news. The good news is there’s more golf to play and you have a business to run.

The recession has no doubt taught you a lot about your core competencies, operational inefficiencies, customer relationships and people. You probably have more control over your budgets, cash flow, pricing and product portfolio as well. Those are all positives. What now?

Recessions end and, while we’re not out of the woods yet, there are several indicators pointing to a brighter future. However minor, most businesses are shifting from cost cutting to planning and investment decisions. How are you approaching your marketing investments? How aggressive should your next shot be?

Looking back may help us look forward. Every company adjusts expenses to revenues but successful companies never stop investing in critical competencies, be they product development, infrastructure or general marketing, most of which is digital now.

The recession of 2001, which was brought on by 9/11, was studied by Bain & Company. They evaluated 2500+ companies and concluded:

About 24 percent more firms moved from the back of the pack to the front in the 2001 recession compared with the subsequent period of economic calm (in terms of) net profit margins and sales growth.

Southwest Airlines is a good example. With a strong balance sheet and some cost advantages, Southwest grew sales and market share, while the other airlines, their larger competitors, cut personnel and capacity, Southwest grew and took share by increasing their marketing investments, lowering fares and retaining all their employees, a move that kept their labor force motivated and and loyal for years.

The results were astounding. Southwest increased its fleet 51 percent in the following six years and is still the only airline to be profitable since its inception. Wal-Mart offers another example of investing during a recession. They used the 2001 recession to launch their “Everyday Day Low Prices” slogan. It proved was such as success that they’re doing something similar today, you could say it's their recession-based marketing strategy. 

This time Wal-Mart is using the current downturn, as well as the demise of Circuit City, to enter consumer electronics and, potentially, challenge Best Buy. In addition, they are remodeling their stores to make them more open and consumer-friendly, more like Target’s. These are big investments. Does Wal-Mart know something most companies don’t? Does their success allow them to do what others can’t? Or are they successful because they had the knowledge and courage to act on their goals and aspirations while their competitors responded to their fears?

On Wednesday's post, The Shot, we’ll discuss tactics.

Steve

In a string of emails about the ISA Conference one question became two until the trail led me to the real question on people’s minds: Which companies will win?

I don’t know but maybe this tongue-firmly-in-cheek blog-allegory – blogegory -- about business people will help you find your own answer.

The Jesters: That characterization implies these people are clowns -- silly and frivolous. In some cases that may be true but that’s not my point. The original jester’s job was serious. Their task was to entertain nobility. If they failed their task they risked death. Still sound frivolous? The Jesters of today also serve nobility, the new nobility – senior management. Jesters are easily identifiable by the wide-eyed, feed-me look in their eyes. A condition created by a mixture of fear and expectation. The fear comes from knowing their economic destiny is tied to their ability to complete one seemingly impossible (or ridiculous) task after another. The expectation is a byproduct of their addiction to the next task. The Jester cannot live without the very thing they know may destroy them. Whoa.

The Kings: They take on many shapes and have many names. CEO, President, VP, and Chief-of-something-or-other are a few of the most common. Kings travel from village to village recounting the evils of the Status Quo. Yet they are the bedrock of the Status Quo doctrine. Nary a candle is lit without their blessing. To them the Status Quo represents stability and predictability -- King-food. They must be fed daily and reward those who feed them because they buttress their Kingships and Kingdoms. Kings are also easy to identify. Like a mother duck they have a trail of ducklings sashaying close behind them. Together they travel (some actually do waddle) down hallways and through airports. One quack from the CEO-King scatters the brood. Then, just as quickly, they tumble back into formation. Being out of formation is risky because Kings know the CEO-King must burn-the-sinners to preserve-the-faith and restore the Status Quo. Kings have astonishing power.

Neither Jesters nor Kings are bad people. They provide comfort for the masses. Human beings want to fit in, enjoy being secure, and seek calm in a chaotic world. Most people have learned to ignore new trends, not engage big ideas, and use routine as an ointment/embalming fluid, but not all.

Human beings are also unique with vast individual differences. Some are ill suited to be Jesters and Kings. Let’s call them Leaders.

Leaders have trouble staying in formation. Leaders challenge industry convention, they're rebels, borderline anarchists. That doesn’t mean they wear togas around the office, or that the female species cleans and paints her tootsies at staff meetings. On the contrary, a good leader learns to contain competing doctrines until the time is right, like now.


I wrote this to illustrate the distinction between those seeking change and those seeking Change. Stated another way, between those collecting a paycheck and those pursuing a belief. Hugh MacLeod said, “The market for something to believe in is infinite.”

People tire of Kings and Jesters. They understand that activity sold as progress is just packaged-activity. They yearn for a Leader with a belief they can follow with their heads and their hearts.

It can be tricky, but separate the companies by their teams. Ignore the paycheck-teams and support the belief-teams, they are more likely to be the winners.

Steve
 

In this entry I’ll share comments from industry insiders taken from recent emails and phone conversations on the industrial segment of our economy. Specifically, I’ve synthesized comments from one CEO, two company presidents, eight vice presidents and Ron Nicely, an economic forecaster.

The most common view is the rate of decline in the industrial segment is finally slowing and the segment will “bottom-out” in July or August. This will be followed by gradual increases in production, factory utilization and sales. The recovery will be so slow that it is likely sales levels in October/November of 2009 will be approximately where they are today, which is down anywhere from 20% to 50% and more, year-to-year. A few pointed to the recent gains in the stock market as confirmation that a recovery is expected in a 6- (to 9-) month time-frame. If you find that disturbing, wait until you read what Ron Nicely is reporting.

Ron, who reports on and forecasts the industrial segment, and metalworking in particular, each month in his Nicely Newsletter is concerned that the future may be more bleak. In this month’s report he wrote, “I looked back at the metalworking data for early 1982…The decline in the GDP at that time was -6.4% in the lowest quarter, compared to -6.2% in GDP in the 4th quarter of 2008. At that time there was a decline in the metalworking data of  -36.4% that occurred in the 16 months before a bottom was reached. If this one [recession] is the same, the bottom will occur late in 2009. From the bottom it took 4 years and 8 months to get back to the total sales that were being recorded before the decline [1982 recession] began. This would point to the 3rd quarter of Calendar 2014 when sales would equal the high point in 2008.”

Yikes!

Economic forecasting is an inexact science so Ron qualified his remarks and offered some advice: “Every recession is different and it is possible this one may be different; however you [manufacturers and distributors] need to plan for this scenario being similar [to 1982], at least to start, and see how it develops. We did not have the financial problems then that we have now, so this recession could be more stubborn before we see a recovery…The next 1 to 2 years will be difficult and working on new products and looking for new markets will be important to your own company’s recovery.”

Some companies are using this time to reorganize and not just trim "fat," but to structure the business around market segments, such as energy or healthcare, rather than around products. Market segmentation can provide a source of differentiation in the marketplace that a product-based structure often lacks.

Steve