Biz Smarts: How to Avoid the Marketing ‘Death Spiral’

When your gut instinct and evidence are at odds, which do you trust? Sometimes the hardest lessons are the counterintuitive ones.

Such is the case with the need to support your marketing program when the economy falters or sales are stagnant or in decline. When budgets are tight and the pressure is on, it’s tempting to see that slice of the marketing spend as a reserve to hold onto for dear life. But it doesn’t take an Ivy League MBA to see the flaw. When customers aren’t already walking in the door, the best way to change that (and even get a leg up on the competition) is through marketing and advertising.

I was reminded of this basic truth while attending a recent business event where Dale Carlsen — founder and CEO of Sleep Train Mattress Centers prior to its highly lucrative sale — spoke about the key role marketing had played in his success. When sales were down or the economy faltered, all his competitors drastically cut back their marketing.

He suspected doing the same would be a mistake. So he took the counterintuitive road, while his competitors took the road much more frequently traveled. He watched as they cut advertising when sales went down. Then sales would drop further, so they would cut more. He watched and learned as his competitors and their brands faded one by one from the marketplace. He called this behavior “the death spiral.”

I’ve seen this dynamic numerous times. We have quite a few national clients in the home and building products category. When the housing market collapsed, sales in the industry plummeted and large companies went out of business. One of our clients had been the No. 2 brand nationally in its market, behind the dominant No. 1 brand that had owned the market for years. During the downturn, the market leader stopped marketing. It literally went dark.

But even though our client was struggling through the market crash like everyone else, they didn’t go dark. They didn’t spend as much as they did prior to the downturn, but they got smarter, more efficient and more creative in their marketing. When they couldn’t afford a large advertising budget, we got more aggressive with our public relations and media outreach to keep them top-of-mind.

As the economy started to improve, so too did their business – dramatically. They were poised for growth and able to seize it. Today, they are the nation’s market leader, surpassing the “big brand” while they were cautiously counting their marketing budget savings.

The economy is cyclical. A boom offers everyone opportunity for growth. A recession offers you an opportunity for growth if you play your cards right.

Of course, an anecdote here or there is not proof of concept. So don’t take my word for it. There is a well-established body of research that agrees. Perhaps the most famous study was undertaken by McGraw-Hill, which analyzed 600 companies in 16 different industry sectors from 1980 through 1985.

The results showed B2B firms that maintained or increased their advertising during the 1981-1982 recession averaged significantly higher sales growth both during the recession and for the following three years, compared to those that had eliminated or decreased advertising. By 1985, the aggressive advertiser group saw sales at their companies rise 256 percent over those that had not kept their advertising up.

The bull market will not last forever. So when the next recession hits, take Dale’s advice and avoid the death spiral. Do what winning brands do and invest in your future.

 

Originally published in Sacramento Business Journal  – Feb 2018, 8:05 am PDT
© 2018 American City Business Journals

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