End conspicuous spend but maintain investment in product development

There cannot be a marketer in the country that has been unaffected by the economic downturn. While the much-derided ‘Generation Y’ is experiencing a downturn for the first time, many marketers have seen such economic turmoil before. However, the precise nature of its constituents, namely the lack of available credit and the potential marketing opportunities, is unprecedented.

While commentators may herald the ‘end of conspicuous consumption’ and a return to austerity, there is no doubt that this is being forced upon debt-laden consumers. The British public [owes more] than any other European nation and the generation that has bought its way to happiness on a credit card now faces unprecedented uncertainty.

Brands such as John Lewis that held their nerve over Christmas and did not resort to price-cutting will reap the dividends. The key is to avoid distressful marketing and hold true to the quality of the brand. Marketing director of Ford of Britain, has learned his economics lesson the hard way. “At all costs, we have to continue to invest in our future products,” he says. “We didn’t do that in the last recession, and we paid the price. We gave every marketing cost a haircut back in 1990/91, including our future product plans, and we emerged from recession with poorer products as a consequence. That decision affected us for about five years, until 1998, when we replaced the Escort with the Focus, which marked a fundamental shift in our fortunes. We could possibly have done that earlier by maintaining our investment in product development.

The lesson for Ford of Britain’s management has been salutary. They now are absolutely committed to maintaining future product flow, because the success of this business depends on it.

Since 2005 the company has launched two cars every year, apart from 2008, when it launched three: the Fiesta, Focus and Kuga. This year got off to a flying start on 5 January with the launch of the latest Ka – but that doesn’t mean the company is being profligate in its spending. The industry contracts and revenue falls and so you have to rein in your expenditure. That is one of the first things you do, and anyone who tells you otherwise, that you need to spend your way out of a recession, is talking utter nonsense. Try telling the shareholders that you’re not going to make any money for two years.

Ford of Britain is renowned for running a tight financial ship, but even there, costs can be cut. They are looking at all their marketing expenses and taking out some things that are not critical to current or future success. For example, they plan to end title sponsorship of the Rugby Football Union, and the Society of Motor Manufacturers and Traders, of which they are a member. They have also cancelled this year’s Commercial Vehicle Motor Show.

Crucially, however, Ford will focus its marketing investment on its key products – those that bring in most revenue currently and those that offer the potential to do so in the future. The time is right for small cars, and in November, sales of the Fiesta alone were higher than
the total number of Vauxhall sales. In a recession, you have to make your marketing and advertising work harder with less money, which means you have to do a fabulous job on the critical things.

While the marketing for these launches acknowledges consumers’ restricted spending power, with the message that there is no need to compromise on the benefits of a big car to enjoy the additional advantages of a small car, it is emotional rather than functional. The lesson for big ticket items such as cars is that the desire does not change in a recession, so we have to work even harder to convert that desire into purchase. Reducing prices will not affect consumers’ decision to buy, though it can help their justification process.