An economic downturn is a direct opportunity

by Paul Kennedy, Brand Republic 04-Apr-08, 10:00

It stands to reason that the long-term risks of slashing marketing budgets in a downturn outweigh the short-term gains, as highlighted in 'Advertising in a downturn', a timely report published by the Institute of Practitioners in Advertising, writes Paul Kennedy.

The Northern Rock and Bear Stearns crises in the UK and USA respectively are very visible signs that all is not well in the economy. The ominously named "credit crunch" is making it harder and more costly for consumers to borrow money, which will throw a spanner in the works for the UK shopper that used their credit cards to excess in the early part of the decade when borrowing was good.

However, hopefully there will be less of a "crunch", rather a "squeeze". Consumer spending is likely to drop, most likely on premium or non-essential products but life will go on much as before despite the tabloid headlines.

The IPA's research backs up logic, that cutting marketing budgets will only be profitable in the short-term and ultimately the brand will emerge weaker. Furthermore brands that do cut their marketing budgets will fade against those that maintain their spend.

There is even evidence to suggest that an aggressive increase in marketing is required to achieve superior business performance and counter impending economic recession.

However, it seems likely that big brand building marketing is probably first for the chop, especially if rumours about the next Bellwether can be relied on, which conveniently leaves direct marketing in pole position to deliver. Direct has this privilege as it can demonstrate a clear line of sight to the creation of shareholder value. As a direct driver for product sales, below-the-line data-driven marketing is effective, economical and importantly personal.

Sharing key data and making it available at every customer contact point, to generate timely offers for example, will ensure that maximum profit is created from the initial marketing investment. The role of the direct marketer is potentially set to flourish by doing what it does best, deliver value.

Paul Kennedy is head of professional services at Broadsystem.