09 05 Riding Out The Economic Cycle

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Tips for marketing to ride out the recession plus analysis of what to do in the downcycle and upcycle

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09 05 Riding Out The Economic Cycle

  1. 1. RIDING OUT THE ECONOMIC CYCLE - Setting the new agenda for marketing and market research Professor Robert Shaw www.Demand-Chain.com Demand Chain Partners 1
  2. 2. Agenda 1. Global Recession, cycles and uncertainties 2. Downward and upward pressures on marketing spend 3. Riding out the cycle from downturn to upturn 4. Return on Ideas: an action plan for marketing and marketing research Demand Chain Partners 2
  3. 3. The Global recession Outlook • Worst global economic crisis since the 1930s • Worst financial crisis ever • Uncertainty • Complete collapse of confidence throughout the industrialised world • Significant risks of further financial meltdown Demand Chain Partners 3
  4. 4. The Global recession World economic growth Annual % change 7% 6% 5% 4% 3% 2% ? 1% 0% 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 -1% 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 Source: Bryan Finn, Business Economics Demand Chain Partners 4
  5. 5. The Global recession Origins of the crisis • Cheap credit • Financial innovation • Lack of transparency • Corporate greed • Business ethics • Regulatory failure Demand Chain Partners 5
  6. 6. The Global recession Financial derivatives Derivatives: A $700+ Trillion Bubble Waiting to Burst? $ billions ? Source: Bryan Finn, Business Economics Demand Chain Partners 6
  7. 7. The Global recession Imbalances: Surplus countries $ billion 2008 Bryan Finn, Business Economics Source: Demand Chain Partners 7
  8. 8. The Global recession Imbalances: Deficit countries $ billion 2008 Source: Bryan Finn, Business Economics Demand Chain Partners 8
  9. 9. Agenda 1. Global Recession, cycles and uncertainties 2. Downward and upward pressures on marketing spend 3. Riding out the cycle from downturn to upturn 4. Return on Ideas: an action plan for marketing and marketing research Demand Chain Partners 9
  10. 10. How it affects Marketing The Marketing cycle Source: Bryan Finn, Business Economics Demand Chain Partners 10
  11. 11. How it affects Marketing Advertising to Sales ratio Source: Bryan Finn, Business Economics Demand Chain Partners 11
  12. 12. How it affects Marketing The Profit cycle Source: Bryan Finn, Business Economics Demand Chain Partners 12
  13. 13. How it affects Marketing Advertising to Profit ratio ? Source: Bryan Finn, Business Economics Demand Chain Partners 13
  14. 14. Downward pressures on spend • Revenues reduce – Implies lower spends for the same Spend to Sales ratio • Customers become more price sensitive – Implies margins and Gross Profits reduce – Implies lower spends for the same Spend to Gross Profit ratio • Media costs reduce – Implies less spend required to obtain the same impact (GRPs) Demand Chain Partners 14
  15. 15. Upward pressures on spend • Greater switching in the market place – Customers are less loyal and more opportunistic – This is a chance to attract new trial purchasers – But it will need new marketing spend • But, in the short-term, the balance of spend may change: – Away from brand building – Towards “Call to action” & “Point–of-sale” messages – Especially to communicate discounting, promotional offers, New Product Developments Demand Chain Partners 15
  16. 16. Agenda 1. Global Recession, cycles and uncertainties 2. Downward and upward pressures on marketing spend 3. Riding out the cycle from downturn to upturn 4. Return on Ideas: an action plan for marketing and marketing research Demand Chain Partners 16
  17. 17. Riding out the cycle Summary of spend pressures Reduced Lower media revenues costs s ure s s pre New trial d r Reduced wa s ure purchases n s ow profits re s D dp r a pw U Discount, More promote, switching – NPD less loyalty Demand Chain Partners 17
  18. 18. Riding out the cycle Peak •Plan for the downswing •Evaluate priorities •Set optimum budgets for the cycle •Beware being locked into high media rates Downswing •Cut spending on brand Upswing •Maintain spending on profitable •Increase spending on brand short-term marketing •Maintain spending on profitable short-term marketing Trough •Plan for the upswing •Evaluate priorities •Set optimum budgets for the cycle •Take advantage of low media rates Demand Chain Partners 18
  19. 19. Agenda 1. Global Recession, cycles and uncertainties 2. Downward and upward pressures on marketing spend 3. Riding out the cycle from downturn to upturn 4. Return on Ideas: an action plan for marketing and marketing research Demand Chain Partners 19
  20. 20. Professional bodies united over need for action - Market Research will provide vital strategic answers Demand Chain Partners 20
  21. 21. So is this business as usual? • NO • Different mix of research answering new questions • Clients and research firms need to work together defining this new research agenda • Return on Ideas report provides checklists to help define the new research agenda Demand Chain Partners 21
  22. 22. Return on Ideas report – Setting the New Agenda for Market Research • More than 100 organizations talked candidly about what works effectively or not • Some are much better at demonstrating and improving marketing’s value than others • Best cases marketing is the beating heart of growth and the driver of performance ACTIONABLE RECOMMENDATIONS • Key questions for discussion • Checklists • Case examples Demand Chain Partners 22
  23. 23. Return On Ideas – the infinity model Demand Chain Partners 23
  24. 24. An Action Plan for Marketing Research Specific action points • Imagine – Spend for the next phase of the economic cycle – Where to cut spend and where to increase it – New mix of consumer spending – Product innovations and portfolio realignment • Predict – Demand, Revenue, Profitability – Taking into account best estimates for the economy • Demonstrate – What has worked, what has not worked – By type of spend – By product and region Demand Chain Partners 24
  25. 25. IMAGINATION CHECKLIST • Can we really afford NEW STUFF? • Are we hunting for AFFORDABLE ALTERNATIVES? New mix of Research • Are we doing TOO MANY marketing will help activities or TOO FEW? provide vital • Do we have the right MIX of affordable answers marketing activities and ideas? • Are we PAYING TOO MUCH for Ideas and have we sought cheaper sources? Demand Chain Partners 25
  26. 26. PREDICTION CHECKLIST • Do we insist on rigorous predictions of the financial contributions of all new marketing ideas? New mix of • When we predict, do we do enough: Research – Historical analysis will help provide – Testing and experimenting? vital – Observing customers? answers – Searching for analogies with existing situations to provide clues about how the future will unfold? Demand Chain Partners 26
  27. 27. DEMONSTRATION CHECKLIST • Do we insist on post-implementation reviews of every marketing prediction? • Are we using good practice analysis New mix of methods to link marketing activity to Research customer activity? will help provide • Do we have financial models linking vital customer activity to sales and profit answers figures? • Do we investigate cost-efficiency and drive down waste, scrap and re-work? Demand Chain Partners 27
  28. 28. NEW RESEARCH PRIORITIES FOR RIDING DOWNWAVE MORE LESS • Hard Edged Sales & Churn Analysis • Soft Insights • Depth Research on Consumption • Brand Tracking Studies • Pricing and promotions studies • Image and Awareness • Econometric Modelling • Brand Positioning Research • Customer Acquisition Cost Analysis • Nice-to-have studies • Media Cost Optimisation • Conjoint and Product Choice Models NOT: cutting costs or quality Demand Chain Partners 28
  29. 29. PUTTING IT INTO PRACTICE • Keep calm and carry on researching • Take the time necessary to define the new agenda – don’t let finance force it on you • Use the Return on Ideas checklists to guide discussions between clients and research firms on the new priorities • Run workshops to define new priorities for research Demand Chain Partners 29
  30. 30. KEEP CALM AND CARRY ON RESEARCHING IT’S FREE DOWNLOAD IT FROM www.Demand-Chain.com Demand Chain Partners 30

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