The Opinion: The real reason the recession is good for marketing

30 Jul 2009

In a new regular column, Gareth Dunlop says the internet is an ideal platform for firms with squeezed marketing budgets

HISTORY will record that when the recession of the late Noughties hit, there was a damning lack of leadership from the communications industry. Rather than guiding Ireland’s corporates and SME businesses through the new world of marketing on a reduced budget, they trotted out the same old “continue to invest in marketing in a downturn” platitudes.

Imagine you are a director responsible for a business of up to 200 employees. Your business has been growing strongly for nearly a decade and is really starting to perform for you. You were just planning a new phase of growth in the early part of 2008 when deep recession hit. Your margins are squeezed, your people are stressed and, not only are there no bonuses this year, there are no pay rises for any of your staff. You are concerned that you will need to lay people off.

You check the business press for inspiration and guidance. What do you read? “Keep your foot on the advertising pedal”; “Marketing through a recession”; or “Investing in building your brand”.

The titles have been altered to ensure that this doesn’t become personal, but the message in each is the same – that businesses should maintain or increase their marketing spend in a recession.

Really? So given the choice of laying someone off, or reducing marketing, you should lay someone off? Or given the choice of a direct foreign territories sales visit to close a hot lead, or continuing to market, you should market? Or given the choice of finalising a product innovation, or continuing marketing investment, you should continue marketing?

The communications industry needs to change the record, and quickly. The palatial marketing budget hasn’t gone away you know; it has downsized to a smaller, online, house.

Here’s the real reason recession is good for marketers. Because the overwhelming mathematics of permission-based online marketing finally finds itself in the spotlight. The economics of tribal marketing are getting enough airtime to give those in charge of media spends all over the island the confidence to stop their interruption marketing and start their relationship-based communications.

So what does the economics of online permission (PR, email and social media) marketing look like?

Conventional press advertising typically has a rate card value of £50 sterling (€58) for every thousand people you wish to reach. The very best recall rates of such adverts are 7pc of people who remember, a further small proportion of whom will go on to buy. By multiplying up, that infers that to get 1,000 people to remember your brand and proposition will cost you £715 sterling (€826), or £7.15 sterling (82.5p) per person.

Email marketing production and delivery costs are notionally £25 sterling (€29) per thousand, with recall rates well in excess of 30pc. Whilst purchase rates are difficult to measure, using the metrics from above, communicating to 1,000 people costs circa £83 sterling (€96) per thousand, or 8.3p per person.

However the 850pc price hike from email to press marketing isn’t the big news. The real story is the economy of scale around assets, in the form of customer information and permission. For your second press advertising campaign, you are starting from scratch again, hoping to interrupt people with a message compelling enough to get them interested once more. However, for your second email marketing campaign, your email recipients have already given you their permission to talk to them and thus expect communication.

So, over time, there is a snowball effect as customers receive greater value through email, recommend their friends, who receive greater value, who receive more emails, who buy more things, who recommend more friends, etc.

So why isn’t everyone doing this? Because not everyone is prepared to accept the catch. Simply put, to paraphrase the famous quote, for the first time ever we can know (if we wish to) which 50pc of our marketing works and which 50pc of our marketing doesn’t work.

And for some marketing managers who have been used to big budgets, big campaigns and long lunches with advertising executives this is the worst news they could ever have feared. Brash shouting to the masses has been replaced by subtle relevance to individuals.

But, perhaps most of all, it means that marketing managers have to start to seriously consider that interruption marketing is on its last dying breaths and permission marketing, dominated online by email and social media marketing, is the future. The recession has only served to focus all of our minds on the overwhelming mathematics of permission marketing.

Gareth Dunlop is managing director of the Belfast- and Dublin-based Internet agency, Tibus. Its customers include DHL Ireland, Department of Health and Children, Irish Football Association, Bank of Ireland, Irish Internet Association, Silicon Republic, BP and Pizza Hut.

Photo: Gareth Dunlop

Read more by Gareth Dunlop:

The class of 2009 wants your job!

Firms must be customer zealots, not technology zealots

Firms need to put aside their fears and embrace the web

Online advertising overtakes TV advertising










Gareth Dunlop runs Fathom, a UX consultancy that helps organisations get the most from their digital products.