There’s no doubt about it – times are tough. In many companies, the accountants will be passing their ruler over expenses, thinking of things to cut from the budget – and if previous recessions are any guide, one of the first things to go will advertising. Yet this could be the worst mistake a wine company could make in the current environment.
Seize the moment
“There is a massive amount of research that basically shows that in any form of downturn, the advertisers who hold their budgets, or even increase them, have a market advantage that lasts anywhere from 18 to 24 months,” says Kristian Barnes, the managing director of MPG Australia and New Zealand. MPG is one of Australia’s largest media planning groups. Not surprisingly, Barnes is not keen on the idea of clients cutting advertising.
He points to successful products that were launched and heavily marketed in a recession, such as the Apple computer and the iPod, saying they’re examples of why companies shouldn’t back off, just because the going is tough. Barnes believes that companies that keep their brand out in the marketplace can actually expand their business, because they will pick up the customers of rivals who cut their marketing.
His assertions are backed up by solid research. In 2005, Dr Gary Lilien and Arvind Rangaswamy of Penn State’s Smeal College of Business in the USA released a study that found that those companies who went into a recession determined to keep marketing, actually strengthened their competitive advantage. It makes sense: if everybody is cutting their advertising, then those who keep the lines of communication open to the trade and to customers, will easily stay ‘top of mind’.
But, says Dr Lilien, speaking from the University of Texas, there’s a catch. There are only some companies that should pursue aggressive marketing strategies when times are tough. For others to do so could not only be a waste of money, but could be counter productive.
What the research says
“What we found in research is that some firms actually do better by investing or increasing their investments during a recession,” says Dr Lilien. “And the way I articulate it, is that these firms have three characteristics: the skill, the will and the till.”
The ‘skill’, he says, is already having a body of marketing expertise. This means being a company that is already brand and customer focused, and has clear and tested marketing strategies in place that have already proven themselves, even if they need to be changed to meet changing circumstances. “This is not the time to say ‘now, all of a sudden, we’re going to be marketing oriented’ if you haven’t got a marketing culture,” he says. Lilien’s idea of ‘will’ is a willingness to see the downturn as an opportunity to be capitalised on. In other words, an ability to resist fear. “In this sense, is the company entrepreneurial? Is it willing to go against the tide?”
And finally, the ‘till’ means having the resources to forgo potential short term losses in order to build the enterprise. “You can’t do this unless you have money in the bank,” says Dr Lilien.
So where does that leave wine companies that lack any or all of these characteristics? “What firms should be saying is that this isn’t the time to begin poaching customers. This is a time to focus on core customers and retain them,” says Lilien. “Don’t lose business in the short term. Keep your base.” This doesn’t mean abandoning marketing activity. Lilien warns that “if you hunker down and do nothing, then what’s going to happen is you’ll sever your connection to your core customers. If you let the cost cutters say ‘let’s cut back these ads’ you’ll float off the pier.”
How should you advertise?
Because there are fewer ads out in the marketplace, you’re more likely to get noticed. But that doesn’t mean sticking to boring advertising. Badjar, who was behind the successful Yellow campaign says that wine advertising is riddled with clichés: “90% is a picture of a bottle with a glass of wine, or else it’s an obsession with heritage and how the vines have grown on the sunny side of the hill for 200 years”. She advises wine marketers to focus on the personality of the wine instead, to connect directly to the consumers you want to reach.
Barnes agrees that this “is an opportunity to trial and do things differently. You’ve got to be smart and deliver the results—but this is an opportunity to push in a new direction.”
Or in other words, stay committed to staying in the market – because you might come out of the downturn holding a bigger piece of market share.
This article first appeared in the middle of a recession, in Meininger’s Wine Business International in 2009.