Study Finds Marketing Key During Downturn

There is a natural tendency to cut marketing spending during a down economic cycle. When revenues and margin begin to decrease, business managers begin to look at ways to cut costs to maintain an acceptable level of profitability.

Marketing is typically in one of those "first to go" categories. While understandable since measuring ROI can be tricky given the demand creation cycle, cutting these activities actually reinforces the downturn for the company.

Even when there is not a downturn, some firms choose to cut marketing when things are going well -- I saw this a few times in the wine industry when I worked for Ed Schwartz Public Relations (now Calhoun & Company). In one particular example, the company worked diligently for two years to get coverage in a major business publication. Soon after, the client called to end the engagement saying that the work was phenomenal and that he no longer needed PR. Rather than invest in building the momentum, he decided to choke it off at its peak.

This research study by McGraw Hill was cited in a North Bay Business Journal article that came through today's Daily Links. The main take away for me is a reminder that some businesses grow during recessions. For example, one of my clients is up 70% YTD, and the main reasons for it are enhanced focus among the (fabulous) team of people and a strong, targeted marketing plan.

Investing in your brand awareness and loyalty (especially within your target market) when others are cutting, actually brings your business a greater ROI.


The Power of Goals - A 3 Part Process for Plan Preparation

Setting goals is normal part of everyday living in modern society. Whether it's getting to the gym three times per week, creating and tracking a budget, or spending time with the family on Sundays, setting specific goals helps identify what is important and to live a life of purpose.

In the business world, setting and measuring goals is a very important practice for success. John Wooden, one of the most successful college basketball coaches of all time and author of one of my favorite business books, Wooden on Leadership, believed that winning (or losing) was a matter of preparation. For Wooden, the process of becoming the best team possible -- setting goals and tracking success -- was the most important predictor of success:

"Success is peace of mind, which is a direct result of self-satisfaction in knowing you made the effort to do the best of which you are capable."

In the wine industry, particularly in smaller and younger businesses, goal-setting is often primarily focused on the production side. We spend a lot of time setting goals for vineyard yields, fruit processing, aging, style, production level, recognition, etc.

Production goals are undoubtedly important given the need to deliver delicious wine, but, if there is no plan specifying goals for people and processes, managing the business side becomes increasingly difficult.
The symptoms of lack of preparation include rising inventories, decreased demand, unclear and/or inefficient processes, frustration and waning focus among people and, ultimately, decreased sales, profitability, and team cohesion.

Many want to believe that making excellent wine is "enough", but with competition from imports and new domestic entrants, consolidation in wholesale and account tiers, and the variability of economic cycles, it just isn't. I don't necessarily believe in the "new normal" of consumer spending (people tend to revert back to old habits once economic pressures decline), but I do believe in the "new normal" of the competitive landscape in the wine industry.

The great news is that preparation is a proactive process, not something out of our control like enormous flocks of birds preying on vineyards or rain during harvest. It's something we all have in our power to do provided we commit the necessary time and brainpower.

Preparation is also a positive learning process. It helps you understand why certain tactics worked and others didn't, and gain knowledge of team strengths and challenges. Viewing this process in a positive light means freeing yourself as a business manager to make mistakes and then seeking the understanding that comes from correcting them. Wooden again speaks to this value:

If you're not making mistakes, then you're not doing anything. I'm positive that a doer makes mistakes.

In my practice, goal-setting for established wineries is a three-part process. First, I seek to understand the winery's strengths and challenges with interviews and surveys: confidential individual interviews and then surveys of key stakeholders including staff, trade and consumers. Then, I provide data analysis and recommendations to my clients and their teams, which serve as a point for further discussion about goals and processes. Finally, based on the knowledge gained from these conversations, I work with owners and managers to develop a strategic marketing plan identifying organizational and sales goals, mapping out specifically who is doing what, and when and how performance will be measured. We work to establish an engaging and motivating review process and coach the "players" to success based on preparation.

The research phase of this process respects and includes the winery's past while mapping out a proactive future. A consultant can't enter a company and effectively make recommendations based on prior experience alone. My experience working with close to 60 wineries ranging from domestic "one-man" operations to global producers gives me a series of best practices, but it doesn't give me the proprietary knowledge that is just as important in delivering excellent preparation.

For new wineries, there is still a research phase based on identified competitors, and focus groups can be used to augment it. Preparation for a new winery means that there isn't a lot of data to consider for the plan, but there is also a "fresh slate".

Operating with a common set of goals has several power effects. Teams become more focused and united, prioritization is easier and more effective coaching is possible. The feeling of setting and achieving (or surpassing) a goal also helps build momentum needed for the next year, when we need to plan all over again!

In my next post, I'll discuss meaningful business goals for the wine industry.