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Planning Around a Recession

Feb 3, 2008  •  Post A Comment

Are we in a recession? Who knows. Even the experts don’t agree.
In fact, I seem to recall that the experts did not agree even during the last two bona fide recessions. It was only when we were emerging from those down cycles that the economists finally identified them as recessions.
The fact is, we just don’t have a clear way to identify a recession. So for the sake of discussion, let’s just assume we are currently in one.
In a recession, customers don’t stop buying; they just stop “over-buying.” In other words, they start thinking twice about that $4 Starbucks latte and start talking about how great 99-cent Dunkin Donuts coffee really is after all. Spending more conservatively on small items helps the American consumer rationalize larger purchases such as cars, vacations and clothes.
So what to do when your local market economics wither? You need to make sure that your television ad campaign generates an even higher return on investment to compensate for a smaller market opportunity.
How do you do it? Simple. You “recession-proof” your television campaign.
Here are a few tips on how to do that:
Present a superior value. Consumers want to see a commercial from you that can help them stretch their dollars. Auto dealers are moving toward advertising and selling pre-owned instead of new cars. Used cars are a great value and the dealer profits on used-car sales at a rate of 5-to-1 compared with new cars. Department stores start gift-with-purchase events. Furniture stores offer full-room discount deals. Grocery stores start accepting competitors’ coupons. You get the picture. Think about what value statement you can create that makes your product or service a more attractive value than that of your competition.
Create a renewed sense of urgency. In a slower economic cycle, consumers shop longer and buy slower. However, we find that there is always a sector of “now” buyers who will respond to short-term sales promotions. Home builder clients of ours are proving this to be true in all kinds of regional economies. With so much negative press, even attractive home-purchase opportunities are second-guessed by shoppers. What can you do to create excitement and a short-term sales promotion and communicate this excitement in your commercial? Examine the offers in your commercials. Do they motivate? Would you buy from you?
Offer deferred payment. Americans are not broke; it’s just that their cash is tied up in their homes. They overbought during the home sales run-up and now, since home sales have stalled, they have to spend “real” after-tax money instead of home equity money. This has crimped the free cash in the market. Upper-end American consumers have cash but don’t want to take it out of their investments, especially in a down stock market.
So what can be done? Offer deferred payment. Most retailers can assign a small portion (3% to 4%) of their product cost to offset a full year of free financing. Even if you never offered deferred payment before, now is the time. Consumers will be able to rationalize buying from you since they will see the expense of buying as “free” financing; in other words, they would rather use your money to buy than theirs.
Create new service standards. Live Web chat is being used by busy female home shoppers. They like the fact that they can hold a conversation with you while they are at work. (In reality, they are shopping instead of working, but don’t tell anybody!) As a result, home builders are encouraged to include the chat function in their Web sites and to promote that capability in their television commercials. Click to Call (clicktocall.com) is being used by online auto marketers to create an instant connection with a car buyer. Now you can load in your phone number and have the car dealers do all of the dialing. Consumers are using this function more every day. It makes for quick contact—and never underestimate the power of a passionate salesperson in a down economy.
Eliminate wasted ad dollars. If you normally have multiple television stations in your buy, perhaps it’s time approach your station partners and ask for creative support. Ask how these stations can stretch your dollar. If you approach the matter in the right spirit, most station managers will join your cause and help. In a battle, choose your foxhole friends carefully. This is not the time to demand added value; this is the time to request creative support and new ideas.
Buy smarter. Negotiate an annual plan instead a quarterly buy. Television stations can help you on cost if you help them by planning. Next, analyze your current cost per thousand. Has it slowly increased as you’ve added dayparts to your buys? You may find better results in reducing your daypart count and instead double-spotting lower CPM areas such as local news and syndicated programming. Moving prime dollars to access can increase your frequency in your buy and create better response. Adding more morning news to your buys can increase reach and add frequency, as reach numbers for morning news programs in some markets rival those of local evening news.
Look the part. Market share can be bought on the cheap when your competition stops being aggressive and leaves the marketplace. If you see that a major player goes quiet, then get loud. Pick up their customers and try to keep them. Several of our clients had a terrific year in 2007 because, while their competition pulled their TV ads in favor of more “measurable” direct mail, we created a new pricing strategy that enhanced their TV presence and in some cases doubled their market share. The smartest thing to do in a recession is to present your business as aggressive and in search of value shoppers. Some clients even open discount-themed departments to represent this theme visually in their stores.
These are just a few ways to stretch your television advertising dollar in a slow market. Nobody asks for a down economic cycle; let’s stay smart and give the customers what they want and show them the message they want to see. Use your resources creatively. Recession-proof your campaign right now and, while your competition struggles, you may not even miss a step.
Adam Armbruster is a senior partner with Red Bank, N.J.-based retail and broadcasting consulting firm Eckstein, Summers, Armbruster & Co. He can be reached at adam@esacompany.com or 941-928-7192.

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