Tuesday, August 5, 2008

The Importance of Marketing, As Clear as Muddy Water.

If you believe what you read in the news (and I do), it appears U.S. companies experiencing the most sales growth and profitability during our economic downturn (recession) have three things in common:

1.  They are raising their prices.
2.  They are cutting costs.
3.  They are increasing their marketing expenditures.

Procter and Gamble today reported higher profits: "Like most consumer products makers, P&G, with brands ranging from Pampers nappies to Olay skin-care products, has raised prices and cut costs in order to cope with rising costs for energy, resin and other raw materials."

Church & Dwight reported the same basic news, but placed the emphasis on the power of marketing: "On Monday the company said it spent $13.1 million more than in the corresponding quarter last year to promote its largest brands: Arm & Hammer, Trojan, OxiClean and First Response, which helped second-quarter sales increase 8.7%, 8 percentage points of which came from organic sales growth."

On the flipside, Ford announced that it had cut its ad spending by two-thirds over last year's amount [shareholder editorial comment: that is the least of their problems right now].

And then there is Coke, the beverage stalwart, whose CEO (Muhtar Kent) said the company plans to cut $400-500 million dollars from its annual marketing costs by 2011.

On the other hand, Kraft and PepsiCo are spending more:  "Across the board, we are planning to invest even more in 2008 than 2007 for marketing, quality and innovation focusing on our key brands and categories," says Kraft spokeswoman Lisa Gibbons.  While in a July earnings call, CEO Indra Nooyi said Pepsi is "not backing off" ad spending. "We really have an eye towards the long-term future of the company," she said.

So, what does it all mean?  What's the right approach?  Raise prices, cut costs, shrink package sizes, increase marketing, decrease marketing?

As my high school buddy Jim Krupar used to say:  "When in doubt, put the pedal to the metal." Or as my dad used to say when we - as young children - would stand around on the shoreline afraid to test the seemingly cold waters of Lake Erie: "Either get in the water or get in the car, we didn't come here to put our toes in the sand."

No comments:

Post a Comment