the recession survival guide

IMPACTFUL COMMUNICATIONS INTHE DOWNTURN

Leo Rayman, 19-Feb-09

The Recession Survival Guide

Agenda

• Latest Economic Forecast

• Charles Darwin on Recessions

• Three themes:

– Cutting & Spending

– Value & Values

– Innovation & Fame

• Summary & Conclusions

Latest economic forecast

1980-81 1991-92 2001-02 2008-09

Source: IMF, Jan 2009

Source: IMF, Jan 2009

-3.1-2.2 -2.41.9 0.7 0.5

“It is going to be quite nasty”Les Binet, Econometrician, DDB Matrix

People are not going to stop feeding their cats

Market Growth rateCinema admissions 16%Records, CDs, tapes 10%Telecoms 10%Alcohol 10%Soft Drinks 9%Pets 9%Toiletries 8%Confectionery 8%Sports & Toys 6%Food 6%

Annualised increases in consumer spending 1989-1991

Some sectors do well

Charles Darwin on Recessions

Charles Brebner, Plant Superintendent; Richard Deupree

“Recessions accelerate the changes that are already happening”

Ten things to remember

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3.

4.

5.

6.

7.

8.

9.

10.

1. Cutting & Spending

Marketing budget forecasts

Source: IPA Bellwether Survey

A good short-term effect.

Reduced Maintained Increased0%

5%

10%

15%

20%

14%

8%

12%

Marketing spend (as % of market size)

RO

CE

du

rin

g d

ow

ntu

rn

Post-2000 data

Source: PIMS & Malik Management Zentrum St. Galen, with thanks to Les Binet, DDB Matrix

But not everyone is cutting.

Q1 20090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

51%

31%

18%

Increase

Maintain

Reduce

PR spend intentions

Source: University of Southern California, Feb 2009

Because cuts hinder recovery…

Reduced Maintained Increased

-2

-1

0

1

2

3

-0.8

0.8

2.0

Marketing spend (as % of market size)

Sh

are

ch

an

ge

du

rin

g r

e-

co

ve

ry

(% p

oin

ts)

Post-2000 data

Source: PIMS & Malik Management Zentrum St. Galen, , with thanks to Les Binet, DDB Matrix

…and damage long term sales.S

ales

Budget maintained every year

Zero marketing year 1 then back to usual weights

Half budget in year 1 then back to usual weights

Time

Source: Data2Decisions

The Great Depression

1991 Recession

It comes down to Share Of Voice

Typical SOV-Market Share RelationshipBased on 1096 Brands in 23 Countries

0

5

10

15

20

25

0 5 10 15 20 25 30 35

Market Share (%)

Sh

are

of

Vo

ice

(%)

Derived from Jones (1987)

Brands here tend to gain share

Brands here tend to lose share

Brands here gain share

Brands here lose share

Source: Les Binet, DDB Matrix

The question is what to cut…

Cut the marketing services supply chain…

Source: PIMS analysis of financial performance of 1000+ firms during market slow-downs.

Cutting and Spending(Product) Quality Maintain

R&D and NPD Maintain

Advertising Maintain / increase SOV

Operational /admin costs Cut

Spare capacity Cut (but beware cutting too far)

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3.

4.

5.

6.

7.

8.

9.

10.

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3. Cutting makes recovery harder

4. Cutting damages brands in the longer term

5. Cut, but cut less than others

6.

7.

8.

9.

10.

2. Value & Values

Recessions change buyer behaviour

Classical Marketing: not right now…

The Great Unknown: How will Value brands fare?

Stelios Haji-Ioannou

Value marketing: Grow new markets, Low pricing, Low cost systems

Growing Markets

The Perils of Followership

Microsoft XBOX 360 Nintendo Wii

Source: Blue Ocean Strategy (Chan Kim/Mauborgne)

Red Ocean Strategy Blue Ocean Strategy

“Tough times make people think more. Something called value

becomes even more important; and sometimes that’s the same as

price but very often it isn’t.”

Source: Jeremy Bullmore

Value not just about Price

Source: Millward Brown Brandz 2007, 500+ brands, 23 categories

Emotional brand campaigns more profitable

Source: Les Binet, IPA Datamine

Increased sales by an annual average of 8% over three years

Ruler Brands do better in tough times

Don’t abandon the brand…

It all comes down to knowing your customer.

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3. Cutting makes recovery harder

4. Cutting damages brands in the longer term

5. Cut, but cut less than others

6.

7.

8.

9.

10.

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3. Cutting makes recovery harder

4. Cutting damages brands in the longer term

5. Cut, but cut less than others

6. Grow markets not just market share

7. Invest in brand as a strategic asset

8. Institutionalise customer insight

9.

10.

3. Innovation & Fame

Source: Epsilon US CMO survey, Summer 2008

Recessions accelerate change

“Something has changed and the reason for the change is online activity, where personal recommendations have become more important and its clearly editorial and its clearly not Advertising-based.”

Word of Mouth (someone you know)

Word of Mouth (from Internet supported by others)

News Story

Word of Mouth (from Internet, in isolation)

Advertising

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

8.40

6.80

6.40

5.80

4.60

Source: Jon Leach, Pattern Recognition

What influences purchasing decisions?

People buy famous brands

Source: Les Binet, IPA Datamine

Source: Weber Shandwick

Content

Community

Connect

Conversations

The Story

Keep the conversation going on TwitterDo our six recommendations agree with the successes and failures you’ve seen? Use the #Web2.0work hash tag to respond to this article on Twitter. We’ll be following them and responding via our McKinsey Quarterly account, @McKQuarterly

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3. Cutting makes recovery harder

4. Cutting damages brands in the longer term

5. Cut, but cut less than others

6. Grow markets not just market share

7. Invest in brand as a strategic asset

8. Institutionalise customer insight

9.

10.

Ten things to remember

1. Some categories grow in Recessions

2. The ability to evolve ensures survival

3. Cutting makes recovery harder

4. Cutting damages brands in the longer term

5. Cut, but cut less than others

6. Grow markets not just market share

7. Invest in brand as a strategic asset

8. Institutionalise customer insight

9. Design campaigns for fame and talkability

10. Social marketing is the way of the future

Summary & Conclusions

Source: McKinsey – Perspectives on Finance and Strategy Winter 2009

Signs of Recovery?

It isn’t all bad.

It isn’t all bad.

Tino Schaedler: Stratocruiser – future airship EF Schumacher – a different kind of economics

3 things to take away

1. If you cut, cut less than your competitors

2. Insulate yourself through the power emotional branding

3. Maintain innovation and fame-building campaigns

“The future, as always belongs to the brave”

Source: Bill Bernbach