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Agrimarketing : May 2009
17 Purdue Advertorial Page 2:00 Purdue Advertorial Page 5/13/09 11:10 AM Page 17 Sales and Marketing Insights from Purdue University ACUTTINGCRISIS B byMaud Roucan-Kane udget cuts, employee layoffs, salary reductions and the list goes on.Managers are facing tough decisions that can ultimately determinewhether their companies survive the current economy. They’re scrutinizing every line itemin their budgets, andwhen they reachmarketing expenditures, it seems to be a logical area to cut costs. But, only at first glance. “Marketing budgets tend to be cut during a crisis because people tend to think aboutmarketing expenditures as a percentage of sales,” says JenniferDennis, a professor at Purdue Universitywho specializes inmarketing specialty crops and consumer behavior. “This isn’t necessarily the best approach.” GASP! SPENDMORE ON MARKETING Whenmanagers considermarketing expenditures as tools to drive sales, and not the otherway around,marketing becomes an investment, instead of a cost of doing business. Customers don’t have asmuch to spend and are going through their budgetswith the samemindset as companies—cut spendingwherever possible. Consequently,marketing expendituresmay actually need to be increased for companies tomaintain their current sales level. Companies can also look at increasingmarketing as a competitive response. While competitors are cutting back ar, Upcoming Agribusiness SEMINARS Precision Selling: Building Relationshipswith Large Farmers June 11-12, 2009 h StructuringDecisions: Innovating through Turbulence September 15-17, 2009 Learn more at www.agecon.purdue.edu/cab Center for Food and Agricultural Business onmarketing, it provides an opportunity for companies to reach new customers by increasing theirmarketing efforts. UGH! NO CHOICE BUT TO CUT Ultimately,managers have to be realistic.And,when they have to choose between laying off valuable employees or trimmingmarketing, the decision to cut advertisingmakes the most sense. “When there is economic uncer- tainty, firms consider budget inmarketing before cuts in people,” says ScottDowney, a Purdue professor of selling and salesmanagement. “It is emotional.Wewould all do that.” If there isn’tmoney to increase marketing, hopefully,most companies can stillmaintain their current budgets. But if cuts are inevitable, there are a fewways to use the available funds in amore effectivemanner. First, it is important to still spend somemoney onmarketing. It is how companies sendmessages about its products and services to current and potential customers.Whenmanagers completely stopmarketing, they’re risking the company’s future success. “By not communicating to cus- tomers,managers are still sending a message, but it’s not positive,” says MariaMarshall, a Purdue professor who focuses on businessmanagement and entrepreneurship. “Plus, it gives competitors an opportunity to interpret thatmessage.And, changing the interpretationwill actually cost companies a lotmore than advertising in the first place.” WHEW! CUTTINGWISELY Ifmanagers are going to spendmarketing dollars, theywant to do so wisely. Itmay be time to rethink customer segmentation and focus on the most loyal and profitable customers. By identifying target customers and sendingmessages tailored for their needs, companies are taking amore strategic approach. The automobile industry’s campaigns featuring cars with efficientmileage during a time when gas priceswere skyrocketing provides an example of tailoring messages tomeet customers’ needs. For companies exploring onlinemarketing options, themessage holds true—it has to deliver value or customerswon’t respond. Regardless of howa company decides to tweak itsmarketingmessages,managers need to share the newmessage across all departments and ensure that it’s being consistently delivered at not only sales, but every level. Downey also suggests thatmanagers identify amethod to evaluate eachmarketing tactic’s return on investment and think beyond sales as an evaluation tool. Inmaking business decisions in today’s economy,marketing is just one line onmanagers’ list of concerns. Although hard for agri-marketers to admit, it takesmore thanmarketing to run a successful business. “Whatmakes a successful busi- ness in good times are the same as in bad times—Good practices and business strategies,” Dennis says. However, now is an opportune time for agri-marketers to show exactly how their strategies affect the company’s bottomline. By analyzing their current customer base in an effort to improve their segmentation strategies and having conversations with customers that will help alter theirmessages, agrimarketers canmaintain their current customers and possibly attract new ones. Then, the next timemanagers seemarketing in their lineby-line scan of the company’s budget, itmay not seemas logical to cut efforts in that department. AM Maud RoucanKane (mroucan@ purdue.edu) is the research associate at Purdue University’s Center for Food and Agricultural Business. May 2009 s Agri Marketing 17
May 2009 Supplement