“Marketing and Sales in a Recession”
George J. Avlonitis
Professor of Marketing
Athens University of Economics and Business – Department of Marketing and Communication
President of The European Marketing Academy (2008-2010)
Ancona, 23 – 24 September 2010
Facolta di Economia “G. Fua”, Piazzale Marteli, 8
Marketing and Sales in a Recession
“The word crisis consists of two symbols in Chinese, one that means
DANGER and the other that means OPPORTUNITY”
John F. Kennedy, President USA
“In a boom, there is enough fat to absorb some bad judgment. In a
recession, good management becomes a survival issue”
The Economist (2002)
“Many managers encounter their first recession, and find it as difficult to
cope with as their first hangover in college”
The Boston Consulting Group
“Chance only favors the prepared mind”
Louis Pasteur (19th century French Chemist)
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
Marketing and Sales in a Recession
There is no doubt that a recession is an extremely difficult period for most companies.
Especially when a recession has universal dimensions, many companies find themselves
unprepared to face great challenges.
Panic is not the right reaction. Such difficult times should be overcome through
methodical and well planned actions. After all, research has shown that those companies
that take a proactive stance and treat the recession as an opportunity are likely to come
out of the crisis stronger than before.
Specific marketing and sales activities have been proved to be beneficial to companies
during a downturn.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
1
Give more emphasis
on marketing research
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
During recessions the available income decreases and, as a consequence, the life –
style of most people changes. In such circumstances, companies should keep their
finger on the market pulse using annual reports, tracking studies, media data, sales
force intelligence, and feedback from customers.
However, marketing research is usually one of the first victims in a recession.
Optimal matching of brands with consumer needs is more than necessary in difficult
times. Even the companies which cannot spend enough money on marketing research
should use all other available means (e.g. sales force) to maintain focus on their own
brands, their customers and their competitors.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
2
Focus on your existing customers
and try to serve them even better
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Existing customers are probably the most important asset during downturns. Marketing
and Sales activities should be well focused on the most valuable, loyal and satisfied
customers. Companies should keep them happy and reward their loyalty.
Customer segmentation, referring to the systematic process undertaken by a firm for the
development of a highly granular customer typology that allows for the identification of
individual customers within each target market, could be very useful in the amelioration
of customer service, emphasizing on the existing loyal customers.
Several criteria can be employed for use in this process, including (among others)
customer buying behavior, customer lifetime value, or customer profitability.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Make sure you are meeting your customers’ existing needs and desires as well as you can.
Use the feedback from your sales force or customer service department to keep track of
changing needs. In this way, you could increase your customers’ buys.
Serve your existing customers even better!
CUSTOMER SERVICE IS NOW MORE CRUTIAL THAN EVER.
Consider whether there are any customers you can afford to let go. Those who are
dissatisfied or pay late in good times are unlikely to be profitable when times get tough.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
CUSTOMER SERVICE
TANGIBLES
RESPONSIVENESS
RELIABILITY
FEELING
OF SAFETY
Customer service:
• Do not leave them alone, uncared for
• Do not let them feel abandoned
• If you can, use a more personalized approach to service
• 68% of people who stopped doing business with a company, did so because they felt
the company didn’t care
• A customer service leader can charge 9 – 13% more without loosing customers
• A customer service leader grow 25 – 40% faster than competitors
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
CUSTOMER SERVICE could also be improved by the systematic usage of multiple sales
channels (e.g., sales force, distributors, direct mail, toll free numbers, telemarketing, and the
Internet) that firms employ to conduct the sales, distribution, and service activities that are
essential if they are to meet customers' needs.
Firms can extensively use multiple sales channels in order to more effectively allocate
resources across customers of different value.
Accordingly, the firms that are making a restrictive use of a limited number of sales channels
may not be able to allocate resources in an efficient manner which is the core pillar of sales
strategy.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
3
Re – examine your targeting
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Companies should focus on the customer segments that are likely to offer the best returns.
A systematic process should be followed in order to prioritize and target the customers who
make up each customer segment according to their economic or strategic value to the firm.
Prioritization may involve the deployment of more than one sales force to call on different
customer groups, whereas targeting involves allocating selling efforts and resources (e.g.,
number, duration, and frequency of sales calls) to different customers.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
A little shift in positioning might make your brand(s) attractive to new profitable targets
that have never been approached before.
CUSTOMER TARGETING SHOULD BE BASED ON:
Detecting customers’ needs and company’s capabilities to fulfill them
Market size estimation
Deep knowledge of competition
Cost – benefit analysis
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
4
Use your creativity
more than ever
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
The best way to take full advantage of the money spent on marketing activities is to be
creative.
When times are tough, try to set the bar high and make every marketing activity as
effective as possible.
For example, many companies today use Corporate Social Responsibility activities (e.g.
Green Marketing) and gain positive publicity with low costs.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
According to CEOs, Corporate Social Responsibility activities
are beneficial to:
Successful brand building (e.g. positive reputation)
Employees’ motivation
Competitiveness
Business risk reduction
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
5
Concentrate on your core brands
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Focus your marketing and sales activities on the brands that are most likely to survive
through difficult times (increased sales, positive image, etc.)
Examine which brands are the most worth supporting and
review your brand portfolio.
Customers have clear and strong associations with those successful brands and know what
makes them desirable. Focus your marketing and selling efforts on these powerful brands
and try reinforcing what made your brands successful in the first place.
In few extreme cases you might even need to eliminate some of your brands.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
IMPORTANT QUESTIONS FOR
BRAND PORTFOLIO MANAGEMENT
Which is the product portfolio of your company?
What is the market share and profitability of every brand you offer?
Are there any new products that should be developed (e.g. environmental
friendly)?;
Is it necessary to eliminate some of your brands;
Ideal portfolio = Balanced portfolio
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
6
Do not necessarily reduce
the price of your brand(s)
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Don’t reduce prices unless you can cut costs or live with lower margins or unless a
price reduction is in accordance with a “low cost” positioning and thus does not
damage your brand’s image in the long run.
It is tempting to cut prices in order to retain price-sensitive shoppers, but this can
be a risky strategy.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
If your brand offers a compelling rational or emotional advantage over the
competition, people who are forced to switch to cheaper brands are likely to buy your
brand again when the recession is over. But once a price premium is lost, it tends not to
be regained. Frequent price promotions train loyal brand buyers to expect lower prices
and to buy only on deal.
On the contrary, “low cost” brands should focus even more on their low price and
communicate it accordingly.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Value of
goods
Customers always want value and
value is not only price
Value of
services
Time
Benefits
Value
Delivered
Costs
Value of
personnel
Value of
brand
Price
Effort
To be competitive on price is essential
But value is not only price: be consistent with
your positioning to be ready when the cycle
turns around.
Stress
Source: Professor Luca Pellegrini, Presentation at the 6th International Conference of the Greek Retail Association
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Value of
goods
Assortment selection,
Quality, Performance,
Environmental
friendliness, etc.
Pricing
Price
Value of
services
Information, Advice,
Complementary
services
Store lay-out
Time
Courtesy,
Competency,
Welcoming
Efficiency
Effort
Communication
In-store
experience
Stress
Value of
personnel
Value of
brand
Source: Professor Luca Pellegrini, Presentation at the 6th International Conference of the Greek Retail Association
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
7
Try to differentiate
yourself from competition
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Companies should
carefully decide how
to differentiate from
competition.
Quality
A DIFERENTIATION MUST BE:
• Clear – distinct
• Easy to communicate
• Profitable
Innovation
Service
Price
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
8
Try to maintain the amount
of your promotion budget
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
During recessions one of the first actions most companies take is to cut back on promotion
expenses of their products or services. However, cutting back on marketing activities (e.g.
advertising) and sales activities (e.g. sales force) in downturns saves money in the short term,
but undermines the long-term equity of brands.
It is impressive that, as research has shown, advertising expenditures decline an average of 5%
when a 1% decline occurs in the Gross Domestic Product.
This signifies that, during tough times, most of your competitors will reduce their advertising
spending and their promotional expenses in general.
This fact constitutes an EXCEPTIONAL OPPORTUNITY for you to step ahead.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
… the evidence
Companies that maintain / increase advertising:
1920’s recession (Vaile 1927, HBR) have biggest sales increases
1970 recession (ABP/Meldrum & Fewsmith) have sales/profits advantages in
years following recession
1974-75, 1981-82 recession (ABP/Meldrum & Fewsmith) their sales grow better
during and after the recession
1990-91 recession (Kamber, 2002) their sales growth increases compared to
normal times
Graham & Frankenberg (2004) create added value that is extended through the
years following the recession
Srinivasan, Rangaswamy & Lilien (2005) their market share, sales growth, profits &
cash flow are improved
Dekimpe, Steenkamp, Lamey & Deleersnyder (2009) their firm position during
tight economic times is improved and have better profits (B2C, B2B)
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
9
Build strong and long lasting
relationships with your customers
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
During downturns, the development of strong and long lasting relationships with customers is
imperative. Such customers with powerful bonds with your company constitute the best
“salespeople” of your products and services. This fact is of an enormous importance in difficult
times.
Such customers provide increased sales and profit. Typically, profitability per customer
increases as companies understand better what their loyal customers desire and as customers
take what they expect by their suppliers without facing problems.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Through systematic activities, firms can develop different relationship objectives and selling
models to reach each customer. Relationship objectives (selling models) can range from pure
transactional exchanges (in the transactional selling model) to collaborative exchanges (in the
consultative selling model).
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Some finding regarding customer retention
Gaining new customers costs 5 times more
than retaining existing ones.
On average, a company looses 10% of its
customers each year.
A reduction of 5% in customers’ loss can
increase profits by 25%.
Defenders
As
As time goes by, profit per customer
increases.
Supporters
Not all existing customers are happy. Nor all
happy customers will remain customers of
your company.
Loyals
An increase of 2% in customer retention has
the same financial result as a 10% reduction
in the number of employees.
Profits
Customers
Candidates
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
10
Maintain harmonized relationships
between the Marketing and Sales
Departments
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Marketing and Sales are believed to be the most customer centric departments in a firm.
Through their activities, those two departments are in continuous (direct or indirect)
touch with the customers.
A harmonized relationship and cooperation between the Marketing and Sales
departments is indispensable in order for a firm to achieve superior performance,
satisfying the needs and desires of its customers.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
A recent study conducted by the Athens Laboratory of Research in Marketing in a sample
of 132 consumer goods’ companies showed that the organizing and management of
Marketing and Sales functions, as well as the relationship between those two
departments, are crucial factors that affect a firm’s ability to differentiate from
competition, develop a powerful competitive advantage and enhance its performance.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
In particular, findings indicate that the most successful companies, in terms of both
market and financial performance, are those where:
The level of conflict between the Marketing and Sales departments is very low.
Appropriate integration mechanisms between the two departments are applied such
as job rotation policies, common training, sharing of information and open discussions
between members of both departments regarding any problematic issue.
High level of importance is given by both the Marketing and Sales departments to
basic marketing activities, such as market research, market segmentation, targeting,
positioning, new product development, pricing policy, channel distribution design,
advertising objectives determination and customer relationship management.
A high level of collaboration is established between the Marketing and Sales
departments regarding the above basic activities.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
Decision authority is given to the Marketing Department for the execution of (i)
market research, (ii) advertising objectives determination and (iii) new product
development.
Decision authority is given to the Sales Department for the execution of (i) channel
distribution design, (ii) pricing policy and (iii) customer relationship management.
The Marketing and Sales departments are equally involved in the execution of the
strategic decisions of market segmentation, targeting and positioning.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
The departmental power of both Marketing and Sales is very high in the firm and
equal level of power between the two departments is guaranteed.
A competitive strategy is adopted by (i) emphasizing on product innovation and
continuous market research in order to explore and take advantage of new
opportunities and by (ii) reinforcing the perfect collaboration between the Marketing
and Sales departments for the effective implementation of the above strategy.
A high level of market orientation is adopted, reducing also the intensity of conflicts
between the Marketing and Sales Departments.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
10 Marketing and Sales Survival Tactics
An effective relationship between Marketing and Sales departments might favor the
alignment, coordination and integration of the two departments, leading to:
• superior customer value
• strong competitive advantage
• improved operating performance
• outstanding financial performance
When Marketing and Sales departments work well together, firms
see a substantial improvement on important performance metrics
Source: P. Guenzi and G. Troilo, 2007
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”
Marketing and Sales in a Recession
During recessions, customers, marketers and sales people alike must
make the best of a bad situation.
Companies that are afraid to take any radical action to face
challenges might find themselves at a disadvantage when the
recession ends.
Marketers and sales people need to make the most of every euro
spent in support of their brands if they hope to maintain strong
customer relationships.
Those that succeed should then be well positioned to take advantage
of weaker competition when the good times return.
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George J. Avlonitis, Professor of Marketing, Athens University of Economic and Business – “Marketing and Sales in a Recession”