San Diego Business Journal

In a Contracting Economy, Businesses Urged to Focus Budgets

Companies Shoot for Increased Visibility Within Target Markets

BY LEE ZION
Staff Writer

Usually, when the economy stumbles, one of the first things businesses do to save money is to cut their marketing budget.

But that can hurt more than it can help. If a firm cuts back too much, it may lose sales to companies that spend money on ads.

Valerie Chereskin, principal of Carlsbad-based Marketing & PR Strategies, warned that trying to save money by cutting advertising can backfire. Instead, the company could lose sales to other companies with better name recognition, she said.

Chereskin understands the urge to cut back. Her own business has slowed down as she's gotten less work from her clients, she said.

"All of them have cut back on marketing to some degree after Sept. 11, because of the economy. I think it's pretty common for all the companies on the market," Chereskin said.

Still, a business can get good results from marketing, even as it reduces its budget. If a company narrows its focus, it can spend its money more wisely, she said.

"I try to direct my clients into focusing on a small niche in the market," she said. "You can then dominate that niche and have the opportunity of focusing your marketing dollars on a smaller segment, which is going to be more cost effective."

Chereskin cited one of her own clients as an example. Palomar Technologies, in Vista, a fiber optics manufacturer that has become a leader in the field.

- Cutting Back Smartly

"Two years ago, they started this branding campaign to get well known within that niche. Then, when the economy went sour, they did cut back on their advertising, but they did it in very smart ways," she said.

Chereskin noted that Palomar did not eliminate ads entirely. Instead, the firm reduced the size of the ads they placed, she said.

The company also re-used last year's ads rather than designing new copy. Palomar also focused its ad budget on magazines and journals where they were already getting exposure, she said.

The company also put more emphasis on press releases and new product announcements, Chereskin said.

Bruce Heuners, a spokesman for Palomar Technologies, agreed. The company was hit by the slowdown in the tech marketplace, he said.

Still, although overall business declined, the company expanded its market share in the middle of a recession, Heuners said.

"We maintained our product development and our campaign (of) articles, publications, presentations and conferences, and so on. So we became recognized as a leader in this technology area," he said.

Other firms cut back heavily on marketing. But Palomar raised its visibility, and therefore its market share, Heuners said.

- A More Level Playing Field

Chereskin and Heuners aren't alone in trumpeting the importance of marketing during a slowdown. Matt Martelli, creative director of Mad Media, an Oceanside-based media buyer, said some of the most successful ad campaigns were launched during lean times.

"There's a lot of advantages to marketing in an economic recession. The playing field is way more level. You get more for your dollar, while everybody else is pulling back (so you're) making gains in marketing areas and in your brand," he said.

Marketing during a downturn is also a good buy. Magazine space that last year would cost $12,000 now goes for $6,000, he said.

In some cases, a savvy business can sign a long-term deal to lock in such bargain prices even after the economy recovers, Martelli said.

Terry Villines, director of analysis for Beverly Hills-based advertising analysts Phase One Communications, said that in general, advertising during an economic downturn can be highly useful.

However, Villines said there is one problem. An ad might not do much good if it sends the wrong message during a slowdown.

- Image Ads Vs. Consumer Ads

In boom times, many companies focus on "image" ads selling the lifestyle surrounding the product as much as the product itself. Villines cited Nike's ads as an example.

But during a recession, these ads don't work as well. A consumer needs specific reasons why he should buy the product, he said.

Again using Nike as an example, Villines said the company might now focus on the sneakers' health benefits, such as better cushioning to reduce shock and protect runners' knees.

"As companies become much more concerned about the bottom line, they want to be sure that their advertising is working," he said.

The owner of one local ad agency, meanwhile, speaks from personal experience about the value of marketing during a slump. Last year, Susan Lyon, of Lyon & Associates Creative Services, launched a novel ad campaign last year for her toughest client , herself.

- Practicing What They Preach

"Advertising agencies are always notoriously bad about doing their own marketing," she said.

Lyon sent out brochures describing the work the company does, just as the recession hit. The brochures listed some of their most prominent clients, and offered case studies showing how the agency met its clients' needs.

The brochures went out to only 50 companies , mostly firms Lyon hoped to do business with.

"We needed to spend money on that, instead of just taking people who show up on our doorstep," she said. "Just like successful dating , we had to pursue the people that we actually think would be a good match."

But Lyon also sent brochures to already existing clients, as well.

"Somebody might be hiring us all the time to do their brochures," she said. "They might never even think to have me quote on video or TV. Because they don't think of me as the person that can do that."

The brochures allowed her customers to see the broad scope of work she'd done for some of the biggest names in the business , such as Toshiba, Lyon said.

Thanks to the brochure, these companies remembered Lyon's agency could handle several different types of accounts. When the recession hit, many of these firms kept Lyon and cut other vendors instead, she said.

The payoff was dramatic.

"If you look at a lot of my competition, they've done a tremendous amount of layoffs, and some have closed their doors in San Diego. Whereas we laid off a couple of part-time people in June, and that was it," she said. "We certainly haven't experienced the devastation happening to our competition."

The marketing plan played a large role in getting the company through the downturn, and for increased business now that the economy is improving, Lyon said.

Lyon also cited a client who got more value from its ad budget. Cox Communications kept its budget the same during the slowdown , but shopped around to squeeze more value out of what it had to spend. That's how the cable company came to her, Lyon said.

Art Reynolds, vice president of marketing for Cox, said the company was attracted to Lyon because of its creativity, reflected in the brochure it had received a few months earlier. The cable company, preferring to work with several companies, added Lyon to its list, he said.

Lyon helped create two ads for Cox , one that ran in January, and another one airing right now. Since Cox has many services to sell , digital cable, high-speed Internet access and telephone service , it will continue to run more ads throughout the year, Reynolds said.

Reynolds added that many of the services Cox has to offer could be perceived as luxuries, which might not move as quickly during a recession. That makes advertising more important than ever, he said.

"We've been able to keep growing (our service)," Reynolds said. "But in order to make people aware of it, you have to advertise. You won't be seeing us go into any kind of advertising hiatus in the near term."

As for Lyon, her own experience with launching an ad campaign during a recession taught her a lot.

"I'll never stop spending money on marketing. I don't care if we go into the second Great Depression; I'll keep spending money on marketing."