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The "R" Word

Are you scaling back your marketing spend because of tough economic times? You might want to rethink that strategy.

In businesses, as in households, the response to an economic downturn is often a corresponding tightening of the belt: fewer lattes for Mom and Dad, fewer splashy ad campaigns for the marketing department.

But contrary to conventional wisdom — and, in many cases, to instinct — a recession might be just the time to increase marketing spending, thereby taking advantage of listing competitors and capturing the attention of cash-strapped consumers. Many companies react to a downturn “by hunkering down,” says Gary Lilien, professor of management science at Penn State’s Smeal College of Business, who co-authored a 2005 study about proactive marketing during a recession. “Most firms tend to conserve during difficult times,” he says. “But a number of them will increase spending for strategic reasons. One of the things we say in our research is that when times get hard, that’s a very good time to attack if you’re strong.” He likens the strategy to runners undertaking the Boston Marathon, in which many a savvy racer has broken struggling competitors on the notoriously challenging Heartbreak Hill between miles 20 and 21.

The research, which was published in 2005 in the International Journal for Research In Marketing, collected data during the second and third quarters of 2002, so it looked at companies’ behavior during the country’s last recession. Nobody then could have predicted the confluence of rising gas and food prices and record home foreclosures that has contributed to the creation, this year, of a broad base of consumers and companies who can no longer afford extras. “That prior work was done during a milder recession than I think this one is going to be,” say Lilien. “But I think that the findings are fundamental.”

Meeting Hard Times Head-On

Wild Dunes Resort, a 1,600-acre, oceanfront destination resort located near historic Charleston, S.C., found the current economic slide coinciding with the completion of a multimillion-dollar addition. The company knew that sitting idly by while potential vacationers tightened their purse strings was simply not an option. “Our occupancy had to go up,” says Andressa Chapman, director of marketing and communications for the resort, referring to the added rooms that came with the new construction. In February and March of this year, Wild Dunes launched a multipronged “Stay More, Save More” marketing campaign that combined direct mail and e-mail marketing to reach out to both past guests and potential guests, and which harnessed all of the tools at the resort’s disposal: customer databases, the company’s existing e-mail marketing tools, and relationships with travel agencies. “We did change our strategy because of the economic climate,” says Chapman. “We said, ‘What are all of the vehicles we have to get out this one great offer and get ahead for 2008?’ We had to put all of our energy and focus behind it and blast it out of the water.” The approach seems to have paid off. Future bookings rose 34 percent over the same time in 2007; revenues for leisure stays rose 17 percent; and the length of future bookings rose 10 percent. At the same time, Web site traffic increased by 55 percent, and the revenues from that traffic rose 43 percent.

One key to the campaign’s success, says Chapman, was combining direct mail with online marketing, which allowed the resort to attract both last-minute planners and those more likely to stick a special offer on the refrigerator and consider it for a while before booking. “There are those who may have said the effort was too big a risk, that travelers were responding to the economy by scaling back and even canceling vacations at increasing rates,” says Bruce Murdy, president of Rawle Murdy Associates, the marketing firm behind the Wild Dunes campaign. “We felt that was all the more reason to promote incentives for making Wild Dunes the destination of choice, and it worked.”

Tweaking the Message

For some companies, the key to taking advantage of a turbulent marketplace would be to pull out all the stops in established media. For others, it’s an opportunity to try something new. At Dream Dinners, a company based in Washington state, with 200 franchises that provide pre-cut, partially cooked meal components for in-home preparation, the current economic climate has provided a backdrop for the company’s entrée into voice marketing.

In March of this year, the company, which had enjoyed rapid growth since its inception in 2002, found itself working on regaining lost customers. To that end, Dream Dinners launched a two-pronged campaign that combined a direct mailing with a prerecorded voice call. “In this campaign, our focus has changed,” says Sherri Hansen, director of brand development. “Instead of our message being one of convenience, we need to communicate how we’re providing value to our customers.” The current economic conditions have made the company carefully rethink its messaging to take full advantage of its marketing dollars, says Dan Jones, vice president at SmartReply, which executed the voice portion of the campaign. “Dream Dinners wants its consumers to make a value tradeoff,” says Jones, between eating out at a restaurant and enjoying restaurant-quality food at home. It’s a message of practicality rather than luxury.

The voice component of the campaign generated a hefty 5.4-percent response rate, and Dream Dinners decided to repeat the campaign for the month of July, even as the country headed deeper into the economic doldrums. The direct mail portion of the campaign — which included a pre-call to alert consumers to the impending mail — generated a 3.2-percent response rate. While no figures are available yet for the most recent campaign, Hansen feels confident that stepping up marketing in a tough economic climate has proved worthwhile. Going forward, she says, the company will continue to show customers how Dream Dinners can help them weather the economic storm. The company is beefing up its dessert and side dish offerings, for example, to encourage customers to stop at Dream Dinners for a complete meal rather than driving around town to pick up different ingredients. “The good news is that no matter how bad the economy gets, everybody still has to eat,” says Jones.

Filling Customers’ Tanks

One of the most iconic aspects of the current economic downturn is rising fuel prices. At Meijer Inc., a 180-store big-box retailer headquartered in Grand Rapids, Mich., price increases at the pump have spurred one of the company’s most innovative marketing efforts to date.

Meijer offers a very wide array of products at its stores: Customers can buy aquarium supplies, furnish their living rooms or select engagement rings. They can also fill their refrigerators and their gas tanks. It’s with that last item that the company has found the way to consumers’ hearts.

The Meijer Gas Alert program allows Meijer customers to opt-in to receive a text-message alert three hours before gas prices are scheduled to go up. “The receptivity has been huge,” says Mike Romano, executive vice president and co-founder of SmartReply, who worked with Meijer on the gas initiative. “The customers see a lot of value in participating in the program.” The effort began two years ago in Indiana, and was then rolled out to Illinois and subsequently to all Meijer stores in Michigan, Ohio and Kentucky.

“It’s still growing and going strong,” says Romano. “People are actively looking for ways to save money, so the program has become more popular.” Romano adds that escalating marketing efforts during a slowdown has allowed Meijer to retain customer loyalty, which traditionally becomes more elusive as the economy nose-dives.

But companies looking to duplicate Meijer’s success should be mindful of what it takes. According to Smeal’s Lilien, companies need three key qualities to market proactively during a recession: the will, the skill and the till. First, the company must have a culture that enables marketers to resist the instinct to conserve resources during tough times. Second, the company must have a well-established and inventive marketing department. “This is not the time to say, ‘Let’s begin marketing,’” says Lilien. “You’ve got be creative to take advantage of an economic downturn.” Third, company coffers must be ample enough to weather the tough times and increase the company’s marketing spend at the same time. During a recession, says Lilien, “You’re unlikely to see returns immediately, so you’ve got to have sufficient resources.” He emphasizes that not all companies will, or should, step up marketing efforts during a recession; those that don’t have the three key qualities mentioned previously are likely to lose more than they gain. But faced with a gloomy economic forecast, smart companies like Wild Dunes, Dream Dinners and Meijer hope to outpace competitors with pluck instead of trepidation. “A recession is a great opportunity to be more aggressive and to gain share when the economy does turn,” says SmartReply’s Jones. “Now is not the time to be timid.”

According to Frederick F. Reichheld, author of The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value, companies in America on average lose half their customers in five years and half their employees in four. In light of staggering figures like those, it’s no wonder that most organizations out there feel as though they have no choice but to devote all their resources to finding and landing new customers constantly. And yet Reichheld also warns that there is a steep price to be paid for that choice at the exclusion of alternatives. His research suggests that acquiring new customers costs up to five times more than focusing on your existing base of clients. Don’t make the same mistake!

The importance of reaching out and checking in

Top-performing sales professionals stay at the top of their game by ensuring that their prospecting efforts consist of a healthy blend of new leads as well as a focus on existing customers. They find ways to reach out to those they have done business with in the past, to see if there’s an untapped need they can meet. Just as important, if it has been a while since they have heard from a customer, they find out why. Not only does it take less time and money to reach out and check in with people who have previously been sold on the benefits of your product or service, it’s also a sure-fire way to build deeper personal relationships with those clients. That’s why it is vital that you have a retention and reactivation strategy as part of your sales arsenal. Let’s look at how you can engage both of these strategies in your organization today—no matter how big or how small.

Think of your database as a goldmine

The first place you should start looking is your existing customer database. Some are more detailed than others, but most keep track of who you’ve done business with in the past, what they have bought from you and when. It’s a potential goldmine for sales. With a little digging, you might surprise yourself at how many people you know!

You can uncover prospects who have called you in the past but who never bought from you. You may also find clients you haven’t heard from in a while. Find out what happened. Did they choose one of your competitors instead? Were they lured away by a better offer? Were they unhappy with a previous experience? Or maybe it was simply that they hadn’t heard from you in a while and that you had fallen off their radar. Whatever the reason, your job is to find out what happened and find a way to get these people back into your prospecting funnel.

Choose the right tool and have a clear message

Achieving those goals can be as simple as picking up the phone and making some calls. There are other options, too. A professionally written postcard campaign, a direct-mail letter or a tailor-made email campaign can also be very effective in getting the attention of readers and getting the response you’re looking for. One of my clients recently showed me how they make optimal use of their database—consisting of some 20,000 prospects. They showed me how that data gets mined constantly for new business, including sending out invitations to attend teleseminars, online classes, as well as follow-up letters and emails simply to touch base. Whichever tool you choose, make sure your message is crystal clear: we haven’t heard from you in a while...we value your business...and we want the opportunity to demonstrate how much you mean to us. As an added incentive, include an offer in exchange for their reply. It could be something as simple as a gift card, an invitation to lunch at a local restaurant, or even a modest discount on their next purchase. What your offer says to the reader is this “I really care to hear what you have to say.”

Leave no nugget of data unturned

There’s one more thing to keep in mind about databases. There is an astonishing percentage of data in these things that’s never been mined before. Never! I spoke with a tradeshow organizer who shared with me a shocking statistic—companies report that over 80 percent of all tradeshow leads are never followed up on. I’ve seen this happen with my own clients—one of whom acknowledged that they had probably 4,500 tradeshow leads in their company database...and none of which had ever been followed-up on. In cases like that, your best bet is to not spend any more money on trade shows until you first follow-up with the existing leads that you have in your database.

The benefits are clear

Reactivation and retention campaigns are cost effective, but that’s really just the tip of the iceberg as far as benefits are concerned. These are activities that you can undertake on an ongoing basis. You can scale it according to your needs. Keep in mind the wise advice of Frederick F. Reichheld whom I spoke about earlier in this article: “It is much easier to fill a bucket when it isn’t leaking.” He notes that the typical Fortune 500 company has real annual growth of 2.5 percent. If it retains five percent more of its customers each year, real growth will triple to 7½ percent. Your efforts here can really pay off if you’re consistent and your message is focused. Remember, the people you reach via a retention or reactivation campaign are predisposed to listen to what you have to say. You’ve done business with them in the past. So don’t be a stranger!

Colleen Francis, Sales Expert, is Founder and President of Engage Selling Solutions (www.EngageSelling.com). Armed with skills developed from years of experience, Colleen helps clients realize immediate results, achieve lasting success and permanently raise their bottom line. © MMVIII Engage Selling Solutions. All rights reserved: All trademarks used or referred to on this site are the property of their respective owners. No materials on this site may be reproduced, altered, or further distributed without Engage's prior written permission.

Read other articles in this issue:

Direct Mail That Works
Dare to be Different
The "R" Word


Newsletter Overview



November 19, 2019

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