In early July, news of an ongoing British government campaign, targeting decision makers in business and urging them to introduce price reduction measures. This sparked a lot of debate in the marketing community – many of us saw it as a (traditional and expected) challenge to marketing budgets in a time of economic uncertainty, and it resulted in (traditional and expected) reaction against the initiative.
Since then, a government spokesperson has poured water on the idea that there would be marketing expenses to promote such a message; a troubling victory for those of us who would normally defend media investment.
And now, new details have emerged on what exactly this new initiative, “Help for Households”, entails. Instead of promoting a particular path to price cuts, the government is giving a stamp of approval to companies that want it and, through this, giving airtime to the initiatives and promotions on offer. They celebrate Vodafone’s £10 tariffgrateful Asda’s ‘Kids Eat for £1’ schemeand defend Sainsbury’s ‘Feed your family for five francs’ offer. It seems that instead of ordering the industry to cut promotional spending, they’ve opened up a new advertising avenue: a state-sponsored affiliate network, if you will.
I am all for any initiative that credibly supports the end customer. Carat’s approach is based on the ethos of win-win marketing – creating value for the business only where there is value created for the customer in the most appropriate way.
With inflation on the rise and disposable income on the decline, it’s critical that we apply this lens when examining the avenues available to industry leaders looking to help their customers. Reducing promotional spend is one way to lower prices, but what impact does this have in terms of customer and business value? And how to use the many levers of marketing to create something win-win?
The downsides of thoughtless price cuts
Bad for the customer
We live in a free-market democracy where companies can already use the marketing budget to cut prices to support customers and increase customer base – many choose to do so. Where companies can cut costs for consumers, now is definitely the time to do so.
However, a proliferation of price competition will only benefit large companies that can afford to consistently reduce prices. Local businesses will suffer, along with those who need it most. This will make it harder for start-ups to enter the sectors, innovation will slow down, and customers will ultimately have less choice about where they spend their money.
bad for business
For most companies – and it has been proven over and over again – Advertising in a recession is the smart thing to do. It will reinforce your brand at a time when people need signs showing which brands are worth their hard-earned money.
Most people aren’t just looking for “the lowest possible price”, they want to know what your brand offers; why it’s worth it and what they’re buying into.
More than that, if you’re able to advertise during a recession, you’ll benefit from increased share of voice and reduced noise from competitors. These benefits are disproportionate to a normal recovery without a recession. Brands that sink during recessions tend to shrink.
Putting the customer first
Viewing business strategy as an interaction between two levers, price and promotion, is shortsighted. We have more in our arsenal than that and, as always, the best thing marketers can do in a recession is to invest in understanding their customers and adapting where appropriate and feasible.
Within each economic crisis, new behaviors have emerged and different ways of caring for oneself are speaking out. The beloved Marks and Spencer Dine in for £10 promotion was launched during the 2008 recession, on the assumption that many people were looking to swap expensive nights out for weekend-worthy meals at home.
M&S chairman Sir Stuart Rose told CBI’s annual conference in November 2009: “M&S could not let price cuts undermine its reputation for quality…our response has been to send a message to our customers that we know it’s hard for you, we’re on the case and we hope you can trust us to do the right things.
Take away advertising investment and you take away the ability for brands to add value to people’s lives more broadly. A good example of this is Vodafone’s “everyone.connected” campaign, which we are really proud to have supported. They sought to raise awareness of digital poverty in the UK and connect one million people by the end of 2022. Partnerships with Heart and LBC have shown the impact of connectivity on work, education, the health care and social needs of people and at Christmas, in partnership with ITV and Global, we have renamed Boxing Day to ‘Reboxing Day’, encouraging people to donate their old handsets through charities that have delivered them to those who need them most.
To date, Vodafone has provided free connectivity to 500,000 people and is on track to reach the target of 1 million people by the end of 2022. This is not a marketing gimmick or a flash in the saucepan: this makes the difference for a very large number of people. proportion of the 1.5 million households in a situation of digital poverty.
We need to view product changes, expanded ranges and media value creation as a chance to empathize without compromising your business and your category. A win for your customer, a win for your business.
Maddy Sim, Strategic Partner, Carat UK