Part 1 - The Dire Consequences of Austerity Measures in Marketing: Lessons from the School of Hard Knocks

Dear esteemed board members, it is with a wry smile and a heavy heart that I pen this missive, reflecting upon the unfortunate and all too common sight of companies that, in times of economic downturn, opt for the misguided strategy of cutting back on marketing spend. It's akin to deciding to cease watering a plant in a drought, hoping it will miraculously bloom when the sun finally shines.

Firstly, let's turn to the tale of Coca-Cola in the 1980s. They had maintained a dominant market position for years, but then made the catastrophic decision to cut back on marketing during an economic recession. The result? They lost significant ground to their competitors, notably Pepsi, who capitalised on Coca-Cola's retreat and invested in a persistent and aggressive marketing campaign¹. It was a stark reminder that in business, as in nature, the absence of one species allows another to flourish.

And, for a more recent example, let's consider Nokia. Back in the early 2000s, Nokia was the king of mobile technology. But during the 2008 recession, Nokia decided to reduce their marketing and R&D expenditure². In the vacuum they created, Apple introduced the iPhone, and Google launched Android. We all know how that story ended: Nokia is now a footnote in the annals of mobile technology history, while Apple and Google share the spoils of the smartphone market.

These cutbacks may look like smart short-term decisions to your CFO, creating an ephemeral boost to the bottom line. But it is in these perilous moments when companies should be galvanising their marketing strategies, not diluting them. By restricting marketing spend, you effectively turn off the life support for brand recognition, competitive positioning, and customer loyalty.

It is a little like our colleagues in IT deciding to save money by skipping the latest software updates, only to find themselves blindsided by a devastating cyber-attack. Or perhaps it is similar to our friends in Operations reducing quality control in order to cut costs, then facing an onslaught of product returns and negative reviews.

Decisions like these, dear board members, are akin to shooting ourselves in the foot, then wondering why we're limping. Indeed, such actions display a startling lack of foresight, akin to a sailor deciding to jettison his compass and map overboard in a storm to make the ship lighter.

However, this trend of shrinking marketing budgets in hard times is not a necessary evil; it's a choice. A choice demonstrating a lack of bravery, leadership, and, dare I say it, imagination. History has proven time and time again that it is during these downturns that the most innovative and audacious marketing campaigns are born, and where market share is won or lost.

So, the next time the economic waters get choppy, instead of shrinking into a shell, let's rise to the challenge. Let's demonstrate the leadership that each one of us, in our respective positions, is capable of, and stand tall against the storm. The risks are great, but so are the potential rewards. After all, it is through adversity, not comfort, that greatness is achieved.