Executive Interviews: Interview with Richard Rawlinson on Marketing in a Downturn
July 2009 - By Dr. Nagendra V Chowdary

Richard Rawlinson
Vice President of Booz & Company.

• When the customers stop coming and all the signs point to doom and gloom, the first instinct of many business owners is to batten down the hatches, cut budgets to the bone and wait until the economic sun comes out. Should companies look at other avenues to reach out to the customers – for instance, switching over to online sales, or a combination, just the way Kmart has done, or direct marketing?
  There is no simple or general answer to this – it all depends. For example, online marketing might logically flourish in an era of enhanced price sensitivity, because price comparison is so easy, yet our data suggests that many consumers don’t see it that way. Equally, manufacturers are tempted because they look at the distributor and retailer margin and want it for themselves, but then they find that the cost of maintaining effective web commerce capabilities is much more than they think – good websites are expensive, and returns and service a real headache. So the right answer is very individual.

• What does it mean when you say that, “marketers can also thrive by providing alternative, noneconomic reasons for consumers to trade down to less-expensive products?”
  Consumer psychology is a funny thing, and people often like to tell themselves a story that sugars the pill or provides a more attractive motivation for something they need to do, but don’t want to do. Consumers may need to save money, but they don’t always want to be reminded that they are poorer than they were. So sugar the pill by emphasizing the ecological or health benefits of a slimmed down product, for example. When premium US or UK consumer trades down from BMWor Lexus to a hybrid-powered Toyota Prius, they may tell themselves they are saving the planet, but they also know they are saving a bundle on the car and on the petrol. Where you can find another story to help consumers make a migration, they have to make for economic reasons, you may want to use it, at least in categories with a high emotional component in the brand choice.

• The latest SmartCompany Poll found many business owners are finding the temptation difficult to resist, with 44% saying they plan to cut their marketing budget in response to tighter business conditions. While some businesses clearly see little choice but to slash marketing spending, it is a step that puts at risk the current market share, not to mention the loss of future growth opportunities. Therefore, what should be the priority of companies – maintaining market share or maintaining the margins?
  Every marketer has to balance marketing and margins, and it is simply a manifestation of the age-old trade-off between tomorrow and today. The key question is whether your investment today in margin foregone gives you more benefits tomorrow, and that in turn depends essentially on the growth of the market and whether you can keep or extend your competitive position. If you can, make the sacrifice and grow your business... but for other businesses, it’s better to take the money now, while it is on offer... investment in marketing can be money wasted, as well as the best investment you can buy... it all depends on how you can develop your overall competitive position.

• What’s the best way to keep customers in good humor during downturn? How should companies communicate with their customers? What should companies do to retain their customers?
  The key is to work on empathy with customers – to show you understand their situation, that you care and your brand is doing what it can to help. Put your brand on the consumers’ side, dealing with the problems they face. Special offers are very effective, but it is not just the price, but the signals and communication alsomatter. Look for things you can do that respond to consumer fears. Hyundai the car maker had good success with a programthat offered to buy back a car and wipe the debt with no impact on credit rating from any of its consumers who lost their jobs in the year followed.