The Power of Proactive Marketing: How Brands Can Thrive in Economic Uncertainty
As we enter a new year with so many unknowns, the question becomes: how can brands uncover the opportunity in the uncertainty of 2023? The answer may lie in their mindset. The good news is that we have two points in recent history that can give us some insight.
Let’s start back in 2005.
In 2005, The International Journal of Research in Marketing published a study that interviewed 154 senior marketing executives to understand why a recession impacted some firms differently than others. The researchers, Dr. Srinivasan, Dr. Rangaswamy, and Dr. Lilien, intended to answer several questions, the most intriguing being:
What are the effects of proactive marketing during a recession?
The study itself is fascinating and worth the read (click here to view it), but in the interest of time, the researchers concluded that while not all firms do, or should, respond in the same way, firms that have a proactive marketing response in a recession achieve superior business performance even during the recession.
Fast forward to the Great Recession of 2007-2009.
In the middle of the economic downturn, the household cleaning products group Reckitt announced that they expected to increase market share in the US for its products despite an overall flat market expectation in 2009. Rob De Groot, the head of Reckitt’s North American and Australia region at the time, led the vision for strengthening share of voice by increasing advertising outlays (+25%) while their competitors pulled back. As a result...
Reckitt grew revenues by 8% and profits by 14%.
At the same time, Harvard Business Review reported that most of Reckitt’s competitors were experiencing declines of 10% or more.
What helped position Reckitt for this kind of success? Dr. Srinivasan and her research team from 2005 would describe it as a mindset. More on that later.
Weighing the Risk in 2023.
Whether you see your brand as a 2023 version of Reckitt or not, every brand is feeling the economic uncertainties of this new year. But not all brands are responding the same way. Some are circling their wagons and pulling back in advertising, while others are positioning themselves for a more proactive approach.
Regardless of approach, every brand must answer the key question:
Is the gain or loss of market share worth the risk?
As your competitors begin pulling back their advertising, you’ll have an opportunity to take advantage of a vacuum they create by their absence. You can connect with more of their customers, introduce them to your brand and speak to the value you bring, all at a lower cost than when your competitor was vying for the same spot. The cost of that engagement will never be as low as it is now.
On the other hand, if you’re intentionally pulling back and your competitors are the ones stepping into the vacuum you’ve created, you can’t ignore that it will be much more expensive to buy back that same market share in the future.
Your brand should approach these realities strategically, assessing the risk of the investment and appropriately weighing that against other pressures you’re facing.
Again, Dr. Srinivasan’s 2005 research would say the right strategy depends on your brand’s mindset.
The Mindset of a Brand that Invests in Proactive Marketing.
The headline hypothesis that Dr. Srinivasan and her colleagues set out to prove was that the greater a firm’s proactive marketing in a recession, the better its overall business performance. The short answer is... Yes. That proved to be true.
What is more fascinating is that the research goes deep enough to define the mindset of the kinds of firms that choose to proactively market in a recession and unsurprisingly. those firms held common traits:
A strategic emphasis on marketing.
Since these brands have a historical emphasis on marketing differentiation and investments built into the brand’s foundation, “senior executives (not just those in the marketing function) in such firms appreciate the importance of, and the process by which marketing investments help their firms achieve superior performance. And, given the strategic role of marketing in providing a competitive advantage, marketing executives wield significant influence on resource allocation decisions.” This emphasis is so engrained in the brand that, “even non-marketing executives may be reluctant to cut back marketing investments during the recession.”
An entrepreneurial culture.
This is defined in the research as the “extent to which the firm and its top managers are inclined to take business-related risks, and to favor change as a way to obtain competitive advantage... Entrepreneurially-oriented firms, because of their greater inclination to take risks and favor change over the status-quo, are likely to view a recession as an opportunity to gain an edge over their competitors.”
The availability of slack resources.
Slack resources are described as things like under-utilized workers, cash reserves, spare production capacity, etc. An important note here is that some brands might have slack resources available, while others might have to shift priorities in order to create the capacity in their budgets for those slack resources.
A lower impact on the demand for products in their industry.
This is certainly the biggest factor for any brand. When we leap forward to Reckitt’s decisions in 2007-2009, we have to weigh the fact that their brands fall into the categories of hygiene, health, and nutrition, “essentials” that are typically less impacted by economic hardship.
What Is the Right Path for Your Brand?
Regardless of an economic recession or a boom, the 3 core elements of sustainability remain the same:
Grow equity.
Grow share.
Protect profitability.
Proactive marketing might be part of your path to foundational growth during 2023, but you won’t know unless you strategically assess the risk and reward that goes along with it. If you don’t have a partner to help you do that critical strategy work, let’s connect and explore if GO might be the right partner for you.