Now's not the time to trim marketing budgets

By Deborah L. Cohen

CHICAGO (Reuters.com) -- Resist the urge! Don't trim the marketing budget.
That's the advice of strategists specializing in small- to mid-sized companies as we head into an increasingly tight economy and competition for business gets tougher.
While it's temping to view marketing dollars as discretionary - they don't go toward payroll, overhead or production - experts say now is the time smaller companies need promotional efforts most to stand out from the crowd and solidify their brands in the mind of customers who themselves are feeling the pinch of shrinking budgets.
Already there are clear signs of a knee-jerk reaction. According trade publication Advertising Age, in October, the most recent month for which data is available, U.S. ad spending fell 2.5 percent from the year-earlier period.
Instead of hacking, it's better to first ensure that your existing budget - whether spent on traditional outlays like print and television advertising, public relations and special events or newer forms of digital media and so-called guerilla marketing - is deployed as efficiently as possible.

Here's some practical advice from a few experts:
Clearly link marketing strategies to outcomes, says Sally Hodge, president of Hodge Schindler Integrated Communications in Chicago, whose accounts include an airport shuttle service, the American Association of Endodontists, a design school and a financial consulting firm.
"What's critical is not just using the right strategies for your business, but to make sure you have the metrics in place so you know these are the right strategies," she says.
Measuring promotional efforts can be as simple as asking at the point of sale how customers heard about your product or service, to tracking whether your Web traffic increases after a PR effort lands your business prominent coverage in a print article or a newscast.

Spend smarter. If you are ultimately forced to cut, having clear metrics in place will let you know where you're getting the most bang for your buck, Hodge says. And regardless of which promotional channels you use, get the best value for your marketing dollars.
Some examples: Hodge currently likes radio spots for some good bargains, but says you must understand your business and customers well enough to determine if rates and returns measure up. Permission-based Internet marketing strategies, such as e-postcards - easy to design and execute - are an effective alternative to direct mail; they save on traditional printing and postage, and can link the recipient to a special Web page about your product or offer.

Focus on existing customers, says Gary Slack, chairman and CEO of Slack Barshinger, a marketing consulting firm with offices in Chicago and San Francisco.
"Find ways that you can increase revenue with people who are already doing business with you," says Slack, whose clients span large public companies to smaller concerns, like a virtual events host and an online distributor of food equipment and replacement parts.
"When times get tough, too often companies take their eye off their existing customer base and start focusing on attracting new customers, which is usually more expensive, entails acquisition costs and has long sales or buy cycles," he says.
In order to get a larger share of the existing pie, small companies should consider ways to deepen their business relationships, such as investing in original research on behalf of a customer to help them better understand a business issue for which they can provide a solution.
Slack also recommends scheduling regular meetings to understand customers' concerns, and then responding with improvements to a product line or service to make it more valuable. Whenever possible, find out where customers are getting new information on their industry and what is influencing their purchasing decisions.
"There are some companies that look at downturns as a real opportunity to get an advantage over weaker companies in their sector," says Slack.

Enlist customer feedback, says Karen Woon, San Francisco-based director of marketing for Prophet, a brand consultancy that has offices worldwide.
"This is a great time to tap into consumers' insights and understand what really matters to them," says Woon. "Think of it as an opportunity of sorts because many of your competitors will scale back."
Give consumers a forum to provide insight on new products and services, she says, such as an area on your Web site where they can provide feedback. For its part, Prophet conducts an annual survey with both current and prospective clients dedicated to an area of content the firm is interested in learning more about. Most recently Prophet queried on the topic of innovation.
"It gives us an opportunity to learn what's on people's minds," she says.
Woon says tight budgets are a good time for the "test and learn" approach, where new marketing initiatives can be rolled out on a small scale and expanded only when they prove to be effective.
"It makes a lot of sense to try a lot of initiatives on a small scale and see if they work," she says.

Consider non-traditional methods, says Joel Warady, who runs a small marketing consulting firm in Evanston, Illinois. His clients, primarily consumer businesses with annual revenues of $50 million or less, have become adept at creating product buzz without the use of traditional marketing methods such as print advertising.
"The companies that are succeeding are the ones that are smart with their marketing dollars," says Warady. "We focus a lot of our time and efforts on line."
One such client is Peak Enterprises, a Sarasota, Florida-based maker of an oral hygiene product aimed at Gen-Xers called the Tung Brush.
The tongue cleaner has been used by contestants on talent show "American Idol" after efforts to place the product directly into the hands of the show's make-up artist. And the Tung Brush put in an appearance on the content-sharing Web site YouTube when it was incorporated into a young man's humorous quest to mark visits to 100 monuments across the United States by licking them. The product is now carried by Wal-Mart, among other retail chains.
Says Warady: "Those are the creative ideas that small companies should take advantage of."

Deborah Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com