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DOWNTIME OPPORTUNITY Marketing and Media Innovation in Times of Recession Bucharest, 15 th of December 2008. WHEN TIMES ARE GOOD, YOU SHOULD ADVERTISE… WHEN TIMES ARE BAD, YOU MUST ADVERTISE! . 4.3. 1.7. 0.6. -0.8. 0.9. 0.6. Source: AMB, 2001. Source: PIMS database, 1999.

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DOWNTIME OPPORTUNITYMarketing and Media Innovation in Times of RecessionBucharest, 15th of December 2008


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WHEN TIMES ARE GOOD, YOU SHOULD ADVERTISE…WHEN TIMES ARE BAD, YOU MUST ADVERTISE!

4.3

1.7

0.6

-0.8

0.9

0.6

Source: AMB, 2001

Source: PIMS database, 1999

  • Businesses which had increased their marketing share were, on average, not significantly less profitable during recession (10% - 9% - 8%)

  • Market share and profits of those firms that maintained or increased market spend during and after recession, outstripped the ones that cut back

  • Maintaining ‘share of mind’ costs much less than rebuilding it later on

  • Economic downturns reward the aggressive advertisers and penalise the timid ones


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High

Star

“growth”

Question mark

Product-market growth

Cash cow

“maintenance”

or “harvest”

Dog

“harvest” or“divest”

Low

Low

High

Competitive position

AND FOR THOSE ADVERTISERS THAT WANT TO OPTIMIZE THEIR A&P BUDGETS: ZERO BASED BUDGETING

Source: BCG

THE TRADITIONAL MARKETING BUDGETING PROCESS IS INCREMENTAL AND LACKS STRATEGIC PRIORITIES:

  • It gives only limited consideration to the significant differences in A&P intensity and sensitivity among market segments and countries

  • It fails to recognize the fundamental choices to be made among growth, maintenance, and harvest strategies for each brand, segment and country

  • Market share and the impact of A&P investments on profits are not measured, and, as a result, share targets are not linked to A&P budgets


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ZERO BASED BUDGETING CAN FREE-UP MORE THAN 20% OF YOUR A&P BUDGETS!

F

One FMCG’s distribution of A&P investments

in brands as a percentage of turnover

5

High

1

3

25

22

Illustration

17

Market growth

2

4

6

22

19

17

Low

Source: BCG analysis

Strong

Weak

Contested

Competitive position

MANY COMPANIES DON’T OPTIMIZE THEIR PORTFOLIOS

  • Investments in brands with a weak market position (boxes 1 and 2) are relatively small and below the minimum investment level: little impact

  • Investments in brands with a highly competitive and growing market (box 3) are also limited: unexploited potential

  • Investments in brands with a low-growth but highly competitive market (box 4) are insufficient, but too high for a harvest strategy

  • Investments in brands with a leading market position (boxes 5 and 6) are far in excess of the level required for maintenance


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DOW JONES INDUSTRIAL AVERAGE BUDGETS!

RECESSIONS

7/81-11/82: Part 2

Of back-to-back

Recessions.

Continued tight monetary

policy to fight inflation.

Double-digit

interest rates,

soaring unemployment.

15,000

Nov. 21, 2008:

Bear market intraday low of 7,449

11/73-3/75:

Oil shock, energy crisis.

Staglation

(inflation,

economic

stagnation).

“Whip inflation

Now.”

The Great

Depression,

including the

cataclysmic

1929-33

recession

and a

deep 1937-38

recession

The Great

Depression,

including the

cataclysmic

1929-33

recession

and a

deep 1937-38

recession

10,000

5,000

0

1930

1940

2000

1980

1990

1970

1960

1950

Source: Bloomberg

WORST OF TIMES……


Key stats for four mafor recession periods l.jpg
Key stats for four mafor recession periods BUDGETS!

Source: AdAge DataCenter research; IHS Global Insight; Group M;

National Bureau of Economic Research


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THE AUTOMOTIVE INDUSTRY BUDGETS!

The Great Depression (1929-1932)

  • Car sales went down with 71% between 1929 and 1932!

  • Innovations:

    • Chevrolet offered its dealers $ 50 for each unsafe trade-in they send to the junkyard; shrink the supply of second hand cars

    • GM’s Buick began a campaign to promote used upscale Buicks; factory support of used cars helps maintain resale prices

    • The Motor and Equipment Association started in 1930 an ad campaign promoting repair and maintenance; additional revenue streams through maintenance and parts sales

    • Chrysler introduced in 1932 its cheapest car ever, a $ 495 Plymouth; value for money

      Other recessions:

    • Patriotic pitches in later downturns; buy local

    • In 1981, GM and Ford started to offer subsidized car loans to consumers at a time that interest rates were surging (21%); defreeze credits


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FINANCIAL SERVICES BUDGETS!

The Great Depression (1929-1932)

  • The Dow Jones Industrial Index dropped 89% between September 1929 and July 1932

  • More than 7600 banks failed in the US between 1930 and 1933

  • Innovations:

    • The Federal Home Loan Bank, created in 1932 by Congress to support mortgage lending, started an ad campaign in 1933 to encourage consumer borrowing

      Recession 1973-1975

  • Innovations:

    • Congress created in 1974 the Individual Retirement Accounts (IRAS), encouraging workers to take more responsibility for their retirement finances

    • Discount brokers occurred, slashing stock-brokerage commissions (Charles Schwab)

    • The Vanguard Group created the first indexed mutual fund in 1976

    • A Chicago supermarket chain helped pioneer the concept of using credit cards to pay for groceries in 1974


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CONSUMER PRODUCTS AND RETAILING BUDGETS!

The Great Depression (1929-1932)

  • Real Consumer Spending fell with 29% between 1929 and 1933

  • Innovations:

    • GE starts to sell refrigerators with a 4-year service-contract policy (1930)

    • General Foods began test marketing a range of frozen foods in 1930

    • Sears (retail) diversified in 1931 into auto insurance, in 1932 introduced what was effectively a debit card (passbook savings account)

    • Ward (retail) introduced in 1934 a service allowing catalog customers to shop by phone

      Recession 1973-1975

  • Real Consumer Spending in 1974 fell with 0,8%, the biggest decline since 1946

  • Innovations:

    • Frederick Smith launched Federal Express amid rocketing fuel prices

    • Bill Gates and Paul Allen started Microsoft in 1975

    • Miller launched Miller Lite in 1975, the first lower calorie beer to gain acceptance among men


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MEDIA BUDGETS!

The Great Depression (1929-1932)

  • US ad spending plummeted 54% between 1929 and 1933

  • Innovations:

    • Time Inc. launched Fortune magazine in 1930

    • Crain jr. launched Advertising Age in 1930

    • Esquire launched in October 1933

      Recession 1973-1975

  • Real ad spending fell 4.4% in 1974 and 4.3% in 1975

  • Innovations:

    • Time Inc. launched People magazine in 1974. People is now the nr. 1 magazine in number of ad pages and revenues

      Recession 1980-1982

  • Real ad spend fell 3.7% in 1980

  • Innovations:

    • Dawn of cable: launch of CNN (1980), MTV (1981), Disney Channel (1983)

    • Gannett launched USA Today in 1982, now the largest daily newspaper in the US


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ADVERTISING AGENCIES BUDGETS!

The Great Depression (1929-1932)

  • Innovations:

    • McCann and Erickson merged in 1930

      Recession 1973-1975

  • Innovations:

    • Buy low, sell high: Warren Buffet bought more than 10% in Interpublic Group, and also a big stake in Ogilvy&Mather (1974)

      Recession 1980-1982

  • Innovations:

    • Gaining scale: Saatchi&Saatchi acquired Compton Communications in 1982 for $ 57 million; Chiat/Day bought Regis McKenna (Apple) in 1981


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