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PM Forum - Dublin

Marketing Strategy in an Economic Downturn

The first myth debunked by Professor Malcolm McDonald of Cranfield University School of Management for the Dublin Forum was that marketing strategies in an economic downturn should be any different from those employed in a growth market. Getting the basics of marketing right is the key to success in these hard times. This means defining markets and understanding value, creating a value proposition, delivering and monitoring value. The only difference is that some companies get away with not doing the basics right in a growth market but this is not sustainable.

The particular marketing challenges facing professional services firms were highlighted, i.e. the informal management structures inherent in many professional firms and the duality of marketing both as a separate function and during the professional service delivery process. Appropriate qualifications are a prerequisite to gaining credibility at this level, as is the presence of a voice for the Marketing/Business Development function at Board/partner level.

Drawing on his years of practical experience as Marketing Director of Canada Dry and doing consultancy work for leading multinationals, McDonald lambasted the emphasis placed by most Boards on financial, in particular, cost statistics, as opposed to market information, the true barometer of future success. There is too much focus on measuring tangible assets while intangible assets - the overwhelming source of value in most companies - are often neglected, as illustrated by examples from the airline, construction and retail industries.

A proper strategic plan encompasses objectives, market share and market growth information, categorisation of key target clients (no more than 20 for the entire firm), recognition of relevant competitors, specific marketing strategies and full costings.

An analysis of strengths, weaknesses, opportunities and threats (SWOT analysis) should be carried out to establish the firm's competitive position/business strength for each identified market segment rather than for the firm as a whole. Then, the attractiveness of the market segment can be determined through a weighting of the profit pool available (market economic profit and market size and growth), the competitive intensity of the market segment and the regulatory risk.

A similar exercise should be performed for each key client, i.e. assessing the firm's business strength with the customer against the key account attractiveness. The outcome of this exercise will determine the appropriate strategies, ranging from management for cash or pro-active maintenance to selective investment or strategic investment.

The simplistic approach of cutting fees across the board without having carried out this segmentation exercise will result in failure.

Even in a recession, a maintenance level of marketing expenditure must be deployed. The core of the business should be established so that the firm can make cost savings by eliminating wastage outside this core. By adopting a risk-based approach, the present value of the firm's marketing investment can be maximised. This is grown-up, joined-up marketing.

Following Professor McDonald's provocative and at times controversial presentation, a lively Q&A session ensued.

Jacinta Garrihy
IBI Corporate Finance

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