There is a sense of déjà vu as one reads the newspaper,surfs the internet or watches the news on television every day. The headlinesand main stories are invariably about shrinking economies, slackening demandand headcount reduction.
It is no surprise that when demand drops, the standardresponse of most companies is to cut the spending budget (especially marketingspend). The irony is that these steps often exacerbate the situation byreducing the demand even further, leading to a relentless downward spiral.
A counter-intuitive approach:
Your brand can become more noticeable in a category, leadingto a significant growth in market share. This would not only improve short-termresults, but even leave your company poised for much better growth when thesituation finally improves (remember even the Great Depression eventuallyended!).
What is being proposed might seem preposterous, but ifhandled astutely can result in big gains in the short run and the long run.What is even better is that the higher relative media weight need notnecessarily come through higher budgets. There are four clear avenues ofraising money to pay for becoming more visible.
i) Improving returns on spending:
Mathematical modeling based on past data can identify therelationship between sales achieved and the various inputs like advertising andpromotions. If a consumer or trade promotion has not worked in the past, thereis no point in spending on it in the future.
Moreover, when money is limited you may as well choosecampaigns that offer a higher return on investment. Analytics based onregression can help you to eliminate the weak programmes and choose moreeffective ones.
It is surprising that very few companies rigorously evaluatepast spending programmes. By eliminating wasteful expenditure you can make themoney work much harder.
ii) Optimising number of packs sold:
The stronger selling packs invariably end up providing ahidden subsidy to weaker ones. While most companies try to rationalise fromtime to time, they still end up with a sub-optimal portfolio, because theprocess is not a continuous one.
A difficult business environment is the best time toevaluate the total portfolio of products and packs sold. While there will beample reasons to reduce the number of packs, it can even throw up newopportunities that a company can capitalise on, for example, a 50-gm pack thatbridges the gap between a smaller sachet and a 100-gm pack.
By optimising the number of packs you can improve productionefficiency, concentrate on fast-moving items, and increase focus on biggerinitiatives.
iii) Focusing on a few brand-pack-market combinations: If the company is operating across many countries in the world it can choose to focus on the top few brand-country combinations that have much higher inherent strengths and profitability.
If the company is operating mainly in India it can choose brand-pack-state combinations based on competitiveness, media rates and sales tax rates to sell profitable cases. For instance, if five brands have 20 distinct packs in 22 states the total combinations are 440.
From these you might choose two brands and within those six packs in six states (36 combinations or 8% of total combinations) to increase focus through higher support. The paradigm "less is more" works well most of the time.
iv) Negotiating lower rates: When overall advertising is going down for channels, a company with a substantial budget can get media rates that are far better than market rates.
Since TV time is a perishable commodity you can explore having a portion of the budget that uses last minute rates that could be drastically lower. Therefore, higher media weight need not mean higher spend levels if you negotiate shrewdly.
Similarly, in-store visibility rates can also come down when other companies are cutting back. Everything is open to a fresh round of negotiations when the situation is unusual.
The main purpose of this article is to show various ways in which companies can generate funds to pay for higher presence and visibility.
The 'gloom and doom' in the environment shouldnt overshadow some clear opportunities that also exist. There is more to smart management than re-sizing and cutting advertising budgets!
Written by Vivek Bali who is associated with ANV Consulting, Singapore
Originally published in "The Economic Times" dated March 20, 2009, Ahmedabad
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