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What to Tell a Client Who Wants to Cut Their Marketing Budget During a Recession

The cautionary tale of Bear Stearns.

Josh Gordon By Josh Gordon
08/20/2008 -11:23 AM

Earlier this year legendary Wall Street giant Bear Stearns collapsed and was acquired, in crisis, for a pathetic two bucks a share. But some of their problems started back with the 1990 recession when rival Merrill Lynch used the recession to pull ahead of them.

According to an Interbrand study "Leveraging Brand Value in a Downturn":

"Merrill Lynch was seeing the return on its early ’90s branding investment in its ability to build and leverage its reputation in a broader market. It may have outspent Bear Stearns to do so, but the positive return was clear."

How clear? Look at the chart from the study comparing indexed share prices of the two competitors during and just after, the 1990 recession. Merrill Lynch's "outspending" had a huge impact, redefined the competitive landscape between the rivals, and set the stage for Bear Stearns' demise.

For some companies a recession is a time to weather the storm; cut expenses, trim the staff, wait for better times ... and slash the marketing budget. But other companies see a recession as strategic time to take the offensive. When competition focuses more on internal cost cutting they focus less on customers.

The study also documents two other pairs of rivals whose competition was redefined during the last recession: Wall-Mart pulls ahead of Sears, and Gillette head of Colgate Palmolive.

The report concludes with 10 points for managing during a recession including. Here are the last two:

"9. Keep Talking. Don’t stop communicating with your customers. In a downturn, people don’t stop buying;they just buy more cleverly. Take advantage of the general decrease in marketing spending to grab a larger share of voice and define yourself in a less cluttered marketplace. In good times, the best tactic may be advertising, but now is the time to evaluate less traditional ways of communicating with your customers.

10. Define Minimum Standards of Upkeep. It is important to understand what brand investment must be sustained in order to protect your asset. The amount of dollars necessary to retain your brand’s value is money worth spending.It is important to understand what brand investment must be."

How to Use This on a Call

Download the study and the article on Bear Stearns' demise. Keep them in your bag. If a client tells you they want to cut their marketing budget because of the recession, offer the Bear Stearns story as a cautionary tale. Ask if they think their competition might use the recession to steal market share from them.

Download the entire study here ...


Josh Gordon By Josh Gordon -- Josh Gordon is president of Smarter Media where he works with publishers to maximize their online and print revenue through training, consulting, and representation.

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