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Smarter Marketing for Struggling Companies

by James Connor

At a recent public talk in California, the Dalai Lama joked that when everything is going well, people don’t need their spiritual practice. It’s when things go badly that they need something to fall back on.

So too it is with marketing. When companies are exceeding their growth targets and demand is spurring the company on, there is little need to spend marketing dollars. But when demand and growth slow, then watch out. Companies are like big planes. It takes great energy and investment to get them off the ground. But once they are moving, it takes much less energy to keep them flying. So when the initial inertia wears off and the plane starts to fall, it’s not time to cut the engines, it’s time to add more boost.

Usually, the first reaction when a company stalls is to cut marketing expenses. Unfortunately, our first reaction to things is usually the worst choice (this too is something the Dalai Lama says). In fact, it’s the very choice that guarantees the situation gets worse. Someone yells at you, you yell back. The anger escalates. Someone speaks poorly of you, you speak poorly of them. The division widens. Sales start to decline, you cut marketing dollars. Sales diminish further.

Our natural reaction is completely understandable, particularly when we do not see the long-term implications of our actions. Most of our lives and the lives of businesses are spent in a cycle of planting seeds that will create the very effects we want to avoid. So here’s a little marketing wisdom to insure you get the exact effect you seek, a healthy, profitable business.

Every company should know: 1) the value of their customer and 2) work off a return on investment model for marketing expenses. Without understanding these two concepts, it is virtually impossible to take wise marketing steps when a company is struggling.

The value of a customer formula is pretty straight forward. It’s the profit you make on a customer based on the average length of time they are with you, discounted back to present day value. You can even segment your customer value number based on customer segments and the types of products and services you sell to them.

This analysis helps you make profitable marketing choices. If a customer is worth $1,000 over two years, would you spend $200 to win that customer today? Of course you would, as much as possible.

From this knowledge, you plan your marketing tactics and estimate conservative acquisition numbers. If a tactic costs more per customer acquisition than the value of a customer, don’t do it. Truly, don’t do it if it’s not going to make your company more money. So maybe prime time TV spots are out, but that email marketing campaign and local newspaper spots look more promising.

For years, The James Group has utilized this return on investment method called Align to make clients more money. The essence of Align is simple: marketing costs can not exceed the value of the customer. Further details of the Align process, are available in a free white paper at http://www.thejamesgroup.com.

Today, companies face the most difficult business environment in a decade. However, cutting marketing expenses without exploring better options will lead to greater suffering. When times are tough and a business is struggling, it is essential not to cut the marketing engines, just look for smarter ways to ensure return on investment.

James Connor is the CEO and Creative Director of The James Group, an advertising agency that specializes in brand strategy and return on investment marketing.

This entry was posted on Monday, April 27th, 2009 at 11:23 am and is filed under White Papers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.