Putting your money where it works

So it seems as though we are finally coming out of the latest downturn in business. Companies that I have talked to generally agree that since the middle of 2002 things have been ticking up more positively, with the notches getting larger in the early months of this summer.

But while we now see more spending on advertising and promotion of products, we need to wake up a good number of suppliers about how business should be conducted, even (or especially!) through hard times. I have been associated with a venture that started in the months before Sept. 11 and has persevered through the worst of times to come out ahead of the game — cash-flow positive and growing — simply by staying in there and doing it right. Nearly everywhere else I have seen the cutbacks, the layoffs, the plant closings and the hiring freezes which, unfortunately, are part of the mindset of American business. Many companies live month to month, like minimum wage employees live paycheck to paycheck.

David Ogilvy, the genius who was founder/CEO of Ogilvy and Mather, is not someone we can all probably agree with all the time. Some of his rules for marketing are so patently obvious; however, no person who has corporate responsibilities or marketing in his/her job title should be allowed to forget them. The most important and probably the most easily forgotten in business America is, “Regard advertising as part of the product, to be treated as a production cost, not a selling cost.” When times get tough it is not the moment to cut back on promoting your products, whether it is advertising or the size of your NAB booth. That's just a recipe for making a prediction of doom and gloom an absolute reality. But I would challenge any company in our industry to show that isn't the direction it has taken in the last 18 months…

If your product is a success you need to promote that success, reinforce its success, assure your customers that it is a success. Commit long term to your promotions. Short-term exposure rarely works; consistency always does — with the right creative. If you have losing products dump them fast. Promoting losing products is a much worse, embarrassing, misuse of funds. Yes, I know that sometimes a product becomes the boss' baby and getting rid of it is not easy, but you have to do it.

Promoting your products when others are backing away from commitments dramatically increases your share of even a declining market.

Use time periods like these — and it's still not too late to take advantage of the situation, even as we begin to emerge with more confidence in our business — to find and recruit the additional designers you're going to need to further push your position. These people are difficult to recruit during boom years, and easy to recruit during down times. A company that lays off anybody during a downturn automatically scares those that remain.

There is one semiconductor vendor that I have been carefully watching over the last two years. As its competitors have been losing really good people — not because their jobs are in immediate danger, but because the atmosphere suddenly changes when you see support staff and customer service staff being laid off — it has been gaining them. As a result it is spinning out a lot more new products in a terrific growth spurt, at a time when the others are still wondering how to go about securing a recovery. Every time I have seen a corporate statement in the last 18 months about “lacking visibility of the immediate future,” or “the cuts we are making today will put us in good stead when things recover” it makes me cringe, and wonder how some CEOs actually get their jobs.

Company development in difficult times is very little different from investing in the stock market: If you take a long-term view of the market and consistently invest the same amount of money each week/month whether prices are going up or down, overall you will be successful. If you try to second-guess forces that are totally out of your control you will lose. In the corporate equivalent, you have to consistently invest in people, designs and promotions to reap the benefits over time.

Next budget cycle, don't allow anyone to leave the table before you see the promotional expenses for a new product included in the “Cost of Goods Sold.” If the product is a winner you automatically have more budget to promote further assurances to the market; if you have a loser the budget disappears with the product's demise. It's the right way to think.

Paul McGoldrick is an industry consultant based on the West Coast.