In early July, news emerged of a UK government campaign in the works, targeting decision makers in business and urging them to introduce price-slashing measures. It sparked a good deal of debate in the marketing community – many of us took it as a (traditional and expected) challenge to marketing budgets in a period of economic uncertainty, and there was a resulting (traditional and expected) backlash against the initiative.
Since then, a government spokesperson poured water over the idea that there would be marketing spend promoting such a message; an unsettling victory for those of us who would ordinarily champion media investment.
And now, new details have emerged as to what exactly this new initiative, ‘Help for Households’, entails. Instead of promoting any particular path to price cuts, the government is providing a stamp of approval to those businesses showing willing, and through that lending airtime to the initiatives and promotions on offer. They are celebrating Vodafone’s £10 tariff, recognizing Asda’s ‘Kids eats for £1’ scheme, and championing Sainsbury’s ‘Feed your family for a fiver’ deal. It seems that, instead of instructing industry to cut promotional spend, they have opened up a new publicity avenue: a state-sponsored affiliate network, if you will.
I’m all for any initiative that credibly supports the end customer. Carat’s approach is built on the ethos of win-win marketing – a creation of value for the business only where there is value created for the customer in the most appropriate ways.
With climbing inflation and descending disposable income, it’s vital that we apply this lens to examining the routes on offer for industry leaders seeking to help their customers. Promotional spend cuts are one means of slashing prices, but what impact does this have in terms of value for both the customer and for business? And how can you use the many levers of marketing to create something that’s win-win?
The disadvantages of unthinking price cuts
Bad for the customer
We live in a free-market democracy where companies can already use marketing budget to cut prices to support customers and increase custom – many choose to. Where businesses can curb costs for consumers, now is certainly the time to do it.
However, a proliferation of price competition will only serve the larger businesses who can afford to cut prices consistently. Local business will suffer, along with those who need access to them most. So, it will be harder for start-ups to enter sectors, innovation will slow, and customers will ultimately have less choice as to where they spend their money.
Bad for business
For most companies – and this has been proven time and time again – advertising in a recession is the smart thing to do. It will strengthen your brand at a time when people need signposts as to which brands are worth their hard-earned cash.
Most people aren’t just looking for ‘the lowest possible price’ – they want to know what your brand offers; why it’s worth it, and what they’re buying into.
More than that, if you’re able to advertise during a recession, you’ll benefit from increased share of voice, and a reduction in competitor noise. These benefits are disproportionate to a normal recession-free uplift. Brands who go dark during recessions, tend to contract.
Thinking customer first
Viewing business strategy as an interplay between two levers, price and promotion, is short-sighted. We have more in our arsenal than that and, as ever, the single greatest thing marketers can do in a recession is to invest in understanding their customers and adapt where appropriate and achievable.
Within each economic downturn new behaviors have emerged and different means of treating oneself take the floor. The beloved Marks and Spencer Dine in for £10 promotion was launched during the 2008 recession, based on the understanding that many people were seeking to swap pricey nights out for weekend-worthy meals at home.
M&S chairman, Sir Stuart Rose, told the CBI annual conference in November 2009, “M&S couldn’t allow price cuts to undermine its reputation for quality…our response was to send a message to our customers that we know it’s tough for you, we’re on the case and we hope you can trust us to do the right things.”
Do away with advertising investment and you do away with the opportunity for brands to add value to people’s lives more broadly. A great example of this is Vodafone’s ‘everyone.connected’ campaign, which we’re really proud to have supported. They sought to raise awareness of digital poverty in the UK and connect one million people by the end of 2022. Partnerships with Heart and LBC showcased how connectivity impacts on people’s work, education, healthcare and social needs and at Christmas, working in partnership with ITV and Global we rebranded Boxing Day as ‘Reboxing Day’, encouraging people to gift their old handsets via charities who delivered them to those most in need of devices.
To date, Vodafone has provided free connectivity to 500,000 people, and are on track to reach the target of 1 million people by the end of 2022. This is no marketing spin or flash in the pan: it is making a difference to a very sizeable proportion of the 1.5 million households in digital poverty.
We must consider product shifts, expanded ranges, and the creation of value through media a chance to demonstrate empathy without compromising your business and category. A win for your customer, a win for your business.
Maddy Sim, strategy partner, Carat UK