In Flocks and Herds, We Travel

According to my financial adviser, today, over $3.43 trillion is held in cash and money markets, waiting to enter the market “when the time is right.” And yet, in the third quarter of 2009, both the S&P 500 and the Dow Jones had gains of over 15%. In fact, since the low this year on March 9th, the Dow has gained back nearly 4,000 points, which would understandably cause financial advisers to wonder what magical benchmark in record gains has to be fulfilled in order to restore investor confidence.

Historically, according to Robert Votruba (www.robertvotruba.com), people have done exactly the opposite of what they should do, which is sell high once the market has rebounded, and buy or reinvest low. Instead, they tend to wait to buy until investor confidence has returned, which means the stocks have already appreciated, of course.

Marketing has functioned exactly the same way, in my opinion. In the last year, agencies have discounted professional fees, media properties have slashed rates for advertising, and everyone is doing far more with less. So, at a time when advertising and marketing professionals are able to pre-approve, procure and lock-up valuable services — now and for the future, at rates that are 20-30% less than standard market value — why are marketing managers so reluctant to jump in?


For one, they clearly have restricted budgets. In an enviable buyer’s market, advertisers have very little empowerment to capitalize on the opportunities that exist in the market. In this case, it’s a “trickle up” effect. Injections of taxpayer bailout money might have trickled down (an arguable and dubious assumption, by the looks of debacles like the bonuses at AIG and the recent CIT bankruptcy maneuver), but in a contracted economy, the reverberations and cost reductions seem to trickle upward.

It’s a shame, as a business value proposition. I always enjoy watching smart, effective business being conducted, which makes the marketing world pretty frustrating these days. Marketing or advertising expenditures are generally some of the first budget line items to be eliminated or reduced. In fact, having weathered this type of storm twice in 15 years, I consider IridiumGroup a leading economic indicator. We were hit early in June 2008, well before the financial markets plunged in late September on news about Lehman, Bear Stearns and other brokerage houses. That trend continued, with only a few modest aberrations, through 2009. In fact, if Federal Reserve Chairman Ben Bernanke ever wants a clear indication of what is just around the corner, his office might consider creating a new index: Marketing dollars allocated.

During this time, we have continued to market at a consistent pace, and focused our efforts more carefully than ever before. I don’t think we’ve ever been sharper, more capable, or projected more relevant messages. And yet, there was a clear downturn in leads generated during the last 18 months. We would gladly work within constricted budgets and try to deliver as much value as possible for highly competitive rates — at times, at cost — if it meant the opportunity to prove our worth and build an important new relationship.

And yet, those few prospective clients have often declined to engage. Like the Dow Jones, it’s a buyer’s market, but no one is spending. It’s like being in a bargain basement discount store with desirable merchandise and watching all the hungry shoppers stand around, declaring that they need to wait until the prices go higher.

As Stuart Elliott reported on November 6 in The New York Times, the Association of National Advertisers are meeting and looking back on the unusual circumstances of the past year as well as trying to determine what shape their companies — and the economy — will be in for their 100th anniversary. According to Rebecca Saeger, executive vice president and chief marketing officer of the Charles Schwab Corporation, the downturn was “by far the worst of any I have lived through. It took everything we know how to do to get through this.” She added, “The answer has been for marketers not to disappear,” but rather “to seize the moment and take advantage of the opportunities.”
http://www.nytimes.com/2009/11/06/business/media/06adco.html?_r=1&scp=1&sq=marketers%20regroup&st=cse


Bad economies are no time to retreat like tortoises under our shells. No company ever achieved a breakout performance with their brand, without thinking independently and taking a few smart, calculated chances.

Hunkering down, slashing budgets and waiting for the storm to pass is one approach. Being proactive, seeing the opportunities in the market and securing valuable talent that is well-aligned to support marketing and brand managers’ goals — at smart rates — is another. For high performing companies and the businesses that will emerge as capable players, ready to embrace the new opportunities, that's the current modus operandi.