Tuesday, 3:27 p.m. An office park in Santa Clara, CA. DenseTech’s CFO hurdles an intern and rushes into the president’s office gasping for breath.
CFO: Greenspan’s killing us! Nasdaq is in a free fall! Our sales are flat lining! Half the firms in our building are going out of business — even DogFoodCentral.com!!!
President (shouting in horror): What should we do? The board is going to eat me alive!
CFO: Tough call. But I remember last spring when we needed to make cuts somewhere. The Street loves when you lay people off and slash budgets.
President: Whatever we do, remember that the programmers want to rev up work on Version 3.0, so we need money for that top priority!
CFO: But Version 2.0 hasn’t even shipped yet.
President: Doesn’t matter. It’s about being competitive in the future.
CFO: Then we need to cut marketing and sales budgets immediately.
President: Brilliant! Get out the pink slips…
Sounds familiar, eh? This little docudrama has played itself out about 10,000 times over the past eight months or so. And 99 percent of the time it was the dumbest thing the company could have done, likely leaving little chance for it to have a future.
You’re skeptical, I can tell. Heck, I’m in marketing, and I take your money for these kind of things, so you’re likely saying, “How shamelessly self-serving.” You’re right, it is self-serving, but that doesn’t make me wrong.
Survival of the Fittest
Before cross-referencing the communications department section of your Rolodex with the employee termination notices or calling your rep at your public relations (PR) firm to terminate the contract, ask yourself the following questions: How are you going to sell your stuff? How are you going to increase your valuation? Are you going to set up a booth like Lucy in front of the strip mall? Will you have your IT people go door to door like vacuum cleaner salespeople, trying to explain the intricacies of your new software for wireless local area networks (WLANs) to your potential customer — the contracting partner at a major accounting firm?
Take a look at companies that have been leaders, are leaders, and will continue to be leaders in the new economy. One must not lose sight of the fact that AOL, Microsoft, and Sony are not great technology companies — they’re great marketing companies. They know how to tell their stories to potential buyers and investors. These companies have never had the best technology or been fabulous innovators. They destroy the competition with superior strategy and execution of advertising, PR, and other marketing efforts. They do it in good times and bad. And they always make marketing a priority, applying it in everything they do as a company.
When companies quickly pull the trigger and kill off marketing budgets, they are displaying the corporate executives’ view of marketing as an expense, not as an investment. This is a fundamental problem. Marketing, if done correctly (and often, when done in a mediocre manner) generates sales and increases valuation. It makes money. A direct correlation exists between marketing and sales growth — and increased valuation.
The Marketing Mystique
It’s so easy to forget about this correlation for two reasons. First, few CEOs of major companies were trained as marketers; they’re engineers, MBAs, consultants, and so on. The other reason is that for years marketing executives hid behind the fact that they did marketing “magic,” not marketing “business.” They avoided strict scrutiny and delivery metrics, claiming that they performed the immeasurable and possessed a near-mystical quality.
This little trick on the part of marketers of old has created a Sisyphean problem that the industry is trying to overcome to this day.
Many CEOs of businesses with shrinking revenue are claiming that they have been paying through the nose for marketing and PR. But looking at the situation more closely, I would ask: Was it the marketing that didn’t deliver, or your developers and business development team? Were your expectations realistic? Did you measure results — counting hits that drove sales and valuation rather than those that drove your ego? Be honest, now.
I am not implying that there hasn’t been wasteful spending on unnecessary Web site development, advertising, and PR during the boom times of the Internet economy. A lot of companies were burned by bad PR and marketing, so I understand the cynicism. But just because you made a mistake on your marketing before doesn’t mean you should compound it by crippling your company’s survival today.
Opportunity From Chaos
In an unstable economy, companies need to look for good marketing, set their goals, hire the right people, strategize, and measure — then determine what they need to spend to achieve their goals.
In the current market chaos there is indeed opportunity. Most great companies not only survive the tough times but go on the attack during economic downturns.
In remembering that marketing is an investment, companies such as Coca-Cola, AT&T, and Procter & Gamble maintain and even increase spending to gain market share in unstable times. These aren’t companies that perish because of the whims of day traders. These are companies that will see the next century.
So things are going bad today. What are you going to do to grow sales and increase valuation?
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