1. Marketing in a Recession… June 2008

2. ...is about turning something which is seen as a negative... ...into a positive – more revenue / sales, greater share of voice and better consumer relationships

3. First, some clarity on what a recession actually is Why Washington Can't Stop Recession It is a significant decline in general economic activity extending over a period of time The ‘Profit Impact of Market Strategy’ (PIMS) report views a market in recession as experiencing two years decline in volume and is followed by two years of growth

4. There are always differing perspectives Not as bad as you think Doom and gloom “ Today, for many ...the question is not whether a recession is coming, but when. In fact, some are wondering whether one has already begun.” “ People think we're Teflon coated because of links to China." “ If anything, economy started off the year stronger than what it was last year. We actually have some signs that the housing sector is starting to recover, we know consumers are spending freely, the jobs market is strong — there is nothing to suggest that we should be downwardly revising our figures.” “ The household sector is booming at present, but is vulnerable” “ The economy is headed for recession next year, with a 50 per cent plunge in share values and a double-digit drop in house prices” “ economists put the odds of a recession developing within the next year at 40%, according to the median estimate. Nine of the 47 economists responding to the question put the odds at about even” The purpose of this document is to arm marketers against this downturn – however great or small. Alongside this will also help to answer... Source: multiple news and business articles

6. Our point of view is based upon research and experience of previous recessions… We have focused on three areas in this document... 1974 1982 1991 2001

7. Consumer Behaviour Market changes Budget changes

8. Consumer Behaviour Market changes Budget changes Budget changes

9. As soon as times get tough, the pavlovian response amongst the majority of CFO’s is to take the axe to advertising and marketing communications budgets. Source: WARC- How to get ahead in a recession

10. Because managing short term and long term goals is a tricky balancing act Short term goals Long term goals Share holder profitability Quarterly profit and loss statements Brand equity Stakeholder accountability Brand positioning Source: WARC- Advertising during a recession Granted, the weight of short term expectations are compelling and deserve action, but...

11. ...short term savings could actually become a false economy Source: Advertising in a Downturn

12. ...short term savings could actually become a false economy Reducing communications affects short term sales, which... ...negatively affects profit... Source: Advertising in a Downturn

13. ...short term savings could actually become a false economy Reducing communications affects short term sales, which... ...negatively affects profit... ...and once budget is reinstated, recovery period is lengthened... Source: Advertising in a Downturn “ Slashing budgets appear to have a healthy impact on profits, but brands that do so risk losing market share once an economic recovery has begun.”

14. And it’s an important point because when you measure the market performance over the years, we find that the ‘bounce back’ from recession lows are increasing in value Which means in the long run you are not really saving, you are spending more! Source: WARC- Cutting adspend in a recession delays recovery

15. ...as demonstrated by the following Comparison of sales and advertising expenditure Source: McGraw Hill research & WARC- Brave strategies for difficult times Maintained budget Budgets cut

16. ...as demonstrated by the following Comparison of sales and advertising expenditure Source: McGraw Hill research & WARC- Brave strategies for difficult times Growth is slowed by previous budgets cuts Maintaining your spends will allow your brand to capitalise on the following years...

17. ...put simply... You can turn the engine off and feel like you’re gliding...

18. ...put simply... ...but you’re actually falling... You can turn the engine off and feel like you’re gliding...

19. ...put simply... ...but you’re actually falling... You can turn the engine off and feel like you’re gliding... ...and it takes more power ($) to get back up to your previous height, let alone go higher than before

20. Takeout number 1. Reducing budgets is a false economy But being more cost efficient isn’t – we will show you how in the next two sections

21. Consumer Behaviour Market changes Budget changes

22. Consumer Behaviour Market changes Budget changes Consumer Behaviour

23. We all know consumer behaviour changes during a recession Our audience spend less Consumers tend to put off major purchases... ...and trade down to cheaper alternatives... ...which as you know affects your bottom line Source: WARC – multiple reports

24. But, not all consumers stop spending SELECTIVES Brand loyal but need to manage budgets effectively. Extra $ brand investment will be sacrificed elsewhere – eg. Not going on holiday to finance car SHELVERS Changes in economy force their hand into cheaper brands. However, we are not saying they have to like it! During these times then tend to view your brand as aspirational, and can’t wait to get back to buying it. While these consumers may alter their habits to better fit their financial situation they never stop... CORE Brand loyal and loaded. Have the income to manage economic changes Source: WARC – multiple reports

25. … listening to your communication… … to justify / stimulate a purchase, or… … to maintain a relationship which will bloom in the future Source: Market Leader- Successful Competitive Strategies for recession & recovery

26. Looking at luxury brands By doing so they are appealing to the ‘selectives’ to justify their purchase while ensuring that they stay on ‘shelvers’ radar They continue to advertise during a recession At no stage do they compromise branding by price cutting They continue to have strong sales / revenue Source: Millward Brown BrandZ 2008

27. Selective example Intel Inside case study – bucking the trend altogether Intel launched its iconic campaign amidst recession At a time when the rest of their category was competing on price alone. Intel took their premium positioning directly to consumers. Intel took advantage of a soft competitive market to aggressively deliver its message Results 63% increase in sales world wide Became the third most valued brand in the world (behind Marlboro and Coca-Cola). Within two years, preference for the brand had risen to 80% and the company claimed more than 75% of the microprocessor market Source: Encyclopaedia of Major Marketing Campaigns

28. Why continue to speak with them at all? Source: Millward Brown http://www.youtube.com/watch?v=T1l1xVboTTE&feature=email Consumers want / demand a relationship with brands, they are not after an affair Because your brand exists as a relationship with consumers

29. Which is reflected in our own brand choice We trust... Constant communication builds consumer relationships, trust and loyalty

30. Takeout number 2. Consumers want a brand relationship not an affair

31. Consumer Behaviour Market changes Budget changes

32. Consumer Behaviour Market changes Budget changes Market changes

35. Our experience tells us that media revenue deflates during a recession In this softer market, we can find opportunity... Source: IBIS World- Advertising Services in Australia & WARC- cutting adspend in recession delays recovery

36. ...to grow your share of voice Media pressure (share of voice – share of market) Source: Millward Brown & PIMS 354 brands grouped by relative ad-spend when SOV is less than SOM, market share rapidly declines...

37. ...but the is the reverse is also true By maintaining your current spend, share of voice organically increases as competitors reduce activity

38. Clio case study ...Clio was able to steal market share by driving share of voice Results: Renault launched Clio during a recession Admittedly, the car may of had something to do with it, but... They exceeded all expectations, stealing market share from their quieter / dormant competitors Source: IPA Effectiveness Awards

39. Takeout number 3. Ride the organic wave to SOM