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April 1, 2014

In adult life, I have always been an (amateur) economics and (specialist) marketing fundamentalist. In the best possible sense of course.

I well recall sitting in Eco’s 1 at the University of Port Elizabeth back in 1985 and in either the first or second lecture we learnt about the simple yet irrefutable principle of supply and demand.

Later that week, our then First Lady, Tannie Elize Botha, arrived like a giant apricot on campus with her “snorred” (heavily-moustached) bodyguards to give us “ondersteuning” (encouragement) to apply to life what we were now going to be learning.

We then drifted into the Kraal (the now inappropriately named canteen) to ponder what the better half of Die Groot Krokodil (PW Botha’s name of affection) had to share.

Jump forward 29 years:

M&C SAATCHI’s ethos is Brutal Simplicity of Thought, the ability, as our boss, Maurice, The Lord Saatchi says “to be a threshing machine that separates the intellectual wheat from the chaff”.

The law of supply and demand would survive this “threshing machine” challenge.

So what armchair economics and marketing advice do I feel qualified to offer under a Noah-like apocalyptic headline?

Well, some things have me a tad concerned right now about our economy. Why wouldn’t they?

But with all potential crises, the flipside of the coin is opportunity. So I hope to be far less alarmist than actually useful.

Here are the simple facts: South Africans are optimists. We definitely don’t have a savings culture. Never have. “Moenie worrie nie. Alles sal regkom” (“She’ll be right mate” as they say down-unda).

For some of you this may be the bleeding obvious but it is still worth reflection: With South Africans having had easy access to easy money for a decade, with the stock market having been at record highs, most of our kinsmen have maxed out on credit at lower interest rates and with a growing economy.

The Rand, until six or so months ago, was doing generally ok. A poor Rand on the downside means literally everything will cost us more. The only possible benefit is growth in export and thereby more hard currency and job creation.

Interest rates are climbing and are likely to continue to do so. Therefore if people are at their absolute credit threshold at the current interest rates, what will the impact of increases in house and car payments, increased petrol prices as well basics be? The answer is obvious.

So what will advertisers do? Well, a shortage of cash usually impacts sales and with that, marketing spend is always the first casualty. Here’s the first fault. Looking through a prism of marketing spend versus marketing investment.

It’s marketing spend if you are simply telling your existing market what they already know about your business ie your messaging is more of the same, with a few tweaks.

It’s marketing investment if you are sharing relevant new benefits with your existing customers to retain and grow them (often an effective defensive growth strategy) and you are investing to attract new customers from fresh ponds to your brand and business (usually an offensive strategy). Truth is, no matter how you throw the ball in the air, if you don’t spend more on retention and attraction strategies during tough times, it’s going to land on predetermining a poor business outcome. It doesn’t get more basic than that.

So the thing to truly explore is your actual marketing strategies. And when I say marketing, I’m not referring just to advertising; we’re talking product, pricing, distribution and channel here as well. Unfortunately it needs to be said, as most marketing today is simply and sadly, communications.

If there’s less cash around, how do you make your fees more compelling, how do you offer responsible access to bridging finance, not more rope, but actual help? If you’re a car company how do you position yourself to encourage customers to trade down but get them into your brand, to punt your service and parts offering; for retailers, how do you push your value drivers, create new aspirational cheap-chic brands that give you the look without the bite?

Customers will be looking for help in the form of those who allow them to best retain their lifestyles but at more cost effective rates. Restaurants can put fun “budget dinners” together and change their wine lists. The options are literally endless if you embrace tough times.

Now is the moment, just before the “drizzle” starts, to develop and adopt aggressive market share offensive strategies which are specifically “tough time” friendly. These must provide customers with real value versus distress marketing tactics or margin erosion. So rather create a calculated strategic plan that seeks sustainable business solutions through a protracted and unfriendly trading environment.

The one thing we must encourage customers never to do is stop their health insurance, their retirement annuities and trade down on education. The long (or even potentially short term) results will be disastrous – and often unrecoverable.

Banks and Life companies need to educate and help their customers ahead of and through these times. As an old friend of mine once said “if you were there for the wedding, then be at the funeral” – in marketing terms, when the economy turns, and it will, there will be another wedding. But don’t send out the diary blocker just yet.

This is the time to start thinking far less about awareness ads (which probably make up 90% of what we see) and to think much more about smart and creative defensive and offensive strategies. This will be the ark that navigates you through the coming storms.






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