Site Navigation

With US economy taking a big hit with subprime mortgage and credit crunch, concerns of oil and election not helping either, everyone in India is talking about what does US recession mean for them. A very timely piece from our guest contributor Ranjith Pavithran. Ranjith is founder of the web consulting firm Kapston. Read on ..
—–

According to a majority of economists, the US economy has already fallen into a recession.

When recession grips US, it naturally worries all the businesses depending mainly on US consumers and economy. The recession 1.0 or the dot-com bubble did not really impact most of the “global” Indian companies, as they were either non-existent then or was in their early stages with no dependence on US. This may be the first time a majority of Indian companies are facing such a situation, head-on. Are they prepared for recession 2.0?

Opportunity or threat

It’s tougher to take the customer through the sales funnel from awareness to a buying decision during a recession. So when there is a slowdown, the top-line and bottom-line are both pressured. As normal operations cannot suffer and it is easier to cut advertisements than people, the ad budget takes the first and major jolt. Traditionally and unfortunately, the weaker and short sighted companies start the downward spiral during and after recessions. On the other hand, a quick look at the popular brands today reveals that they all got stronger during one or two recession periods.

Instead of cutting down the investments on advertisement and marketing, companies should eliminate the risks as much as possible. Any investment that delivers measurable results and outsourcing the risks is the way to go. Traditional advertisement and marketing mediums like T.V, newspapers, radio and trade shows etc. are almost immeasurable, costly, does not guarantee you return on investment (ROI) and is not the best for a cash crunch period. Companies should revisit their strategy to remarket to existing customers, generate reasons for word of mouth publicity and find and advertise in emerging and cheap mediums.

Outsource your marketing and advertisement risks.

The traditional way of agency commissions and monthly retainer fees leaves the whole risk with the company. The agency either wants to spend more to get more on commissions or else they want to keep on advertising for longer periods. The most risk free model today is cost per acquisition (CPA) or in simple terms pay for results or pay for performance. When the risk of advertisement lies with both the parties, the company de-risk itself to a great extent. By paying only for the resulting sales, you get brand equity improvement, unbiased third party opinions, market research, brand recall and overall business improvement, for free. This also helps free up existing staff for improvement in operations, support, marketing, cross selling and all other core parameters which need attention. Finding an agency with CPA or PFR eliminates the risk of advertisement, considerably.

The emerging mediums

According to reports by Forester, Jupiter Research, BCG etc, digital interactive marketing mediums like social networks, blogs, email, mobile, display ads, rich media & search gives the maximum measurability with minimum cost. Sending communication messages when the user is in consideration phase and in a passive state of mind does not really help. Consumers are more in an active state of mind when they are interacting with these emerging mediums because of the curiosity factor. Chances are some of your messages can become viral and reach millions of people. These mediums also increase the brand recall manifold. Because of the reach of these mediums it is extremely important to be careful while using these mediums. Anything careless can be catastrophic. Advertising in these emerging mediums give access to a certain niche of people un-reached and almost often gives the company a competitive advantage.

Niche and vertical targeting

The next step is to find the right social networking sites where your kind of customers frequent. There are big players like Myspace, Facebook etc. which has large user base and has customers from all part of the globe and from all walks of like. But most of the time and for most of the companies, niche and vertical targeting helps in finding the right prospects with less cost. Where to advertise is a bigger question than what to advertise and to whom.

Influence the Influmers

More than half of Indian consumers are word of mouth (WOM) driven and passive. They take opinions before buying a product or service. Targeting them will not really help. A quarter falls into a category we at Kapston call Influmers or influential consumers. This lot is very proactive in generating WOM. Influmers advocate, influence and persuade the WOM consumers to try something they trust. Companies should carefully plan and devise strategies to initiate conversations with customers and give the Influmers something interesting to talk about. Though it’s a bit difficult to gain trust of this lot, it pays rich dividend in the end. The offline media campaign should be focused at targeting the appetite and habits of the Influmers and the online campaign should complement this effort. Orienting your campaign online will give free research as a by-product about what the market think about your product and services.

The money saved from reducing the advertisement and marketing costs can be reinvested to the business or can be used to swim through this recession 2.0.