Are you scaling back your marketing spend because of tough economic times? You might want to rethink that strategy.

By: Meg Mitchell Moore

In businesses, as in households, the response to an economic downturn is often a corresponding tightening of the belt: fewer lattes for Mom and Dad, fewer splashy ad campaigns for the marketing department.

But contrary to conventional wisdom — and, in many cases, to instinct — a recession might be just the time to increase marketing spending, thereby taking advantage of listing competitors and capturing the attention of cash-strapped consumers. Many companies react to a downturn “by hunkering down,” says Gary Lilien, professor of management science at Penn State’s Smeal College of Business, who co-authored a 2005 study about proactive marketing during a recession. “Most firms tend to conserve during difficult times,” he says. “But a number of them will increase spending for strategic reasons. One of the things we say in our research is that when times get hard, that’s a very good time to attack if you’re strong.” He likens the strategy to runners undertaking the Boston Marathon, in which many a savvy racer has broken struggling competitors on the notoriously challenging Heartbreak Hill between miles 20 and 21.

The research, which was published in 2005 in the International Journal for Research In Marketing, collected data during the second and third quarters of 2002, so it looked at companies’ behavior during the country’s last recession. Nobody then could have predicted the confluence of rising gas and food prices and record home foreclosures that has contributed to the creation, this year, of a broad base of consumers and companies who can no longer afford extras. “That prior work was done during a milder recession than I think this one is going to be,” say Lilien. “But I think that the findings are fundamental.”

Meeting Hard Times Head-On

Wild Dunes Resort, a 1,600-acre, oceanfront destination resort located near historic Charleston, S.C., found the current economic slide coinciding with the completion of a multimillion-dollar addition. The company knew that sitting idly by while potential vacationers tightened their purse strings was simply not an option. “Our occupancy had to go up,” says Andressa Chapman, director of marketing and communications for the resort, referring to the added rooms that came with the new construction.

In February and March of this year, Wild Dunes launched a multipronged “Stay More, Save More” marketing campaign that combined direct mail and e-mail marketing to reach out to both past guests and potential guests, and which harnessed all of the tools at the resort’s disposal: customer databases, the company’s existing e-mail marketing tools, and relationships with travel agencies. “We did change our strategy because of the economic climate,” says Chapman. “We said, ‘What are all of the vehicles we have to get out this one great offer and get ahead for 2008?’ We had to put all of our energy and focus behind it and blast it out of the water.”

The approach seems to have paid off. Future bookings rose 34 percent over the same time in 2007; revenues for leisure stays rose 17 percent; and the length of future bookings rose 10 percent. At the same time, Web site traffic increased by 55 percent, and the revenues from that traffic rose 43 percent.

One key to the campaign’s success, says Chapman, was combining direct mail with online marketing, which allowed the resort to attract both last-minute planners and those more likely to stick a special offer on the refrigerator and consider it for a while before booking. “There are those who may have said the effort was too big a risk, that travelers were responding to the economy by scaling back and even canceling vacations at increasing rates,” says Bruce Murdy, president of Rawle Murdy Associates, the marketing firm behind the Wild Dunes campaign. “We felt that was all the more reason to promote incentives for making Wild Dunes the destination of choice, and it worked.”

Tweaking the Message

For some companies, the key to taking advantage of a turbulent marketplace would be to pull out all the stops in established media. For others, it’s an opportunity to try something new. At Dream Dinners, a company based in Washington state, with 200 franchises that provide pre-cut, partially cooked meal components for in-home preparation, the current economic climate has provided a backdrop for the company’s entrée into voice marketing.

In March of this year, the company, which had enjoyed rapid growth since its inception in 2002, found itself working on regaining lost customers. To that end, Dream Dinners launched a two-pronged campaign that combined a direct mailing with a prerecorded voice call. “In this campaign, our focus has changed,” says Sherri Hansen, director of brand development. “Instead of our message being one of convenience, we need to communicate how we’re providing value to our customers.”

The current economic conditions have made the company carefully rethink its messaging to take full advantage of its marketing dollars, says Dan Jones, vice president at SmartReply, which executed the voice portion of the campaign. “Dream Dinners wants its consumers to make a value tradeoff,” says Jones, between eating out at a restaurant and enjoying restaurant-quality food at home. It’s a message of practicality rather than luxury.

The voice component of the campaign generated a hefty 5.4-percent response rate, and Dream Dinners decided to repeat the campaign for the month of July, even as the country headed deeper into the economic doldrums. The direct mail portion of the campaign — which included a pre-call to alert consumers to the impending mail — generated a 3.2-percent response rate. While no figures are available yet for the most recent campaign, Hansen feels confident that stepping up marketing in a tough economic climate has proved worthwhile. Going forward, she says, the company will continue to show customers how Dream Dinners can help them weather the economic storm. The company is beefing up its dessert and side dish offerings, for example, to encourage customers to stop at Dream Dinners for a complete meal rather than driving around town to pick up different ingredients. “The good news is that no matter how bad the economy gets, everybody still has to eat,” says Jones.

Filling Customers’ Tanks

One of the most iconic aspects of the current economic downturn is rising fuel prices. At Meijer Inc., a 180-store big-box retailer headquartered in Grand Rapids, Mich., price increases at the pump have spurred one of the company’s most innovative marketing efforts to date.

Meijer offers a very wide array of products at its stores: Customers can buy aquarium supplies, furnish their living rooms or select engagement rings. They can also fill their refrigerators and their gas tanks. It’s with that last item that the company has found the way to consumers’ hearts.

The Meijer Gas Alert program allows Meijer customers to opt-in to receive a text-message alert three hours before gas prices are scheduled to go up. “The receptivity has been huge,” says Mike Romano, executive vice president and co-founder of SmartReply, who worked with Meijer on the gas initiative. “The customers see a lot of value in participating in the program.” The effort began two years ago in Indiana, and was then rolled out to Illinois and subsequently to all Meijer stores in Michigan, Ohio and Kentucky.

“It’s still growing and going strong,” says Romano. “People are actively looking for ways to save money, so the program has become more popular.” Romano adds that escalating marketing efforts during a slowdown has allowed Meijer to retain customer loyalty, which traditionally becomes more elusive as the economy nose-dives.

But companies looking to duplicate Meijer’s success should be mindful of what it takes. According to Smeal’s Lilien, companies need three key qualities to market proactively during a recession: the will, the skill and the till. First, the company must have a culture that enables marketers to resist the instinct to conserve resources during tough times. Second, the company must have a well-established and inventive marketing department. “This is not the time to say, ‘Let’s begin marketing,’” says Lilien. “You’ve got be creative to take advantage of an economic downturn.” Third, company coffers must be ample enough to weather the tough times and increase the company’s marketing spend at the same time.

During a recession, says Lilien, “You’re unlikely to see returns immediately, so you’ve got to have sufficient resources.” He emphasizes that not all companies will, or should, step up marketing efforts during a recession; those that don’t have the three key qualities mentioned previously are likely to lose more than they gain.

But faced with a gloomy economic forecast, smart companies like Wild Dunes, Dream Dinners and Meijer hope to outpace competitors with pluck instead of trepidation. “A recession is a great opportunity to be more aggressive and to gain share when the economy does turn,” says SmartReply’s Jones. “Now is not the time to be timid.”