It is tempting for wealth managers to cut marketing costs in a recession, but evidence suggests this is not a smart long-term strategy.
Financial Armageddon hasn’t happened, although in October last year we came pretty close! Instead, we are in a recession, which will come to an end. At the time of writing, there are a handful of countries likely to come out of recession this year. While private banks and other wealth managers are in better shape than most in the financial services industry, there is an increased focus on retaining existing clients and attracting new ones. Disillusioned investors are dropping advisors who have underperformed – or have failed to communicate properly during the crisis. Relationship managers are working harder than ever to keep their flock sweet as they court the newly available client money. Marketing support for these activities is not optional or a “nice to have” – it is mandatory.
In every recession (and I have lived through several), the issue of marketing in a recession is raised. As companies batten down the hatches to see out a recession, marketing is almost inevitably one of the first business functions to have budgets slashed. It is understandable – it is much easier to cut budgets than jobs – particularly where it seems to be a discretionary spending area. This is a mistake wealth managers can’t afford to make right now.
Very quietly, arguments are also being made about the importance of continuing marketing through a recession, because it will have long-term benefits… but I get the sense that not many people really believe this.
In reality, there is no argument. Every wealth manager that believes it has a future must carry on with its marketing. It only becomes an argument if you don’t understand what marketing really is, and what it can do for your business in the long run.
The numbers highlight the importance of contining, not stopping, marketing spend during a recession, according to the UK-based marketing and business consultancy, Market Accents. It cited the case of a 1999 study in the Marketing Society’s journal that looked at the marketing activities of 1000 UK companies during and after a recession found the companies that halted their advertising were 2 per cent more profitable during the recession than those that carried on their advertising. However, in the recovery period after the recession, the advertising companies racked up profits of 5 per cent more and market share 2.8 times higher than the non-advertising companies.
What is marketing?
If you regard marketing as the department that just produces literature and advertisements, then maybe you should cut back on this in a recession. But this is a pale shadow of what marketing should be. Marketing is above all a strategic function and the classic definition still holds – “getting the right product to the right people at the right time.”
In my book marketing should:-
Provide the road map for the company to achieve its business goals – profitably. Create the brand, and its values. To encapsulate what you want to be known for. To differentiate you from others in your marketplace. And your brand can add hugely to the value of the company. Right now, clients are looking for a wealth manager that is trustworthy and transparent. Your brand must somehow convey this. Determine your product strategy… what the products are, how they are different, how they are priced, and distributed. Support your sales activity. To give them the edge, the confidence that they have the best sales support material – whether literature, web site or ads. Help to create the client experience… to make sure that you make the most of your customers. After all, you spend a great deal to get them in the first place. It then makes sense to make the most of your investment. Client experience is arguably the number one area for wealth managers to focus on as a differentiator to grow the business. Help you to understand and know your market place and competitors, so that you can find a different edge.
So, ask yourself, can you do without this from your marketing function? (Of course, if you are not getting this anyway, that is an entirely different issue!). I would hope that the answer is “no”! Even in a recession.
What I would accept is that in a recession there may be a need to cut costs and work smarter – but that is no reason to throw the baby out with the bathwater! Instead, let’s consider how smarter marketing in a recession can deliver outstanding results in both the shorter and longer term.
There are seven points to consider:-
1) Is your proposition right?
Is what you are offering right for the market? How will you respond to the changes over the past year in the marketplace? And if you do change your proposition, will it still be right as we come out of recession?
It is generally good to be seen to be responding to changes in the market in the short term, but your long term brand and what you are known for will add the greatest value to your business.
2) How good is your marketing?
When budgets are tight it is an opportunity to think more about targeting your marketing better, rather than a broad, blunderbuss approach. The key to good target marketing is a good database. And not just the database itself, but how you use it in a disciplined and segmented way. Most companies that I have worked with are lazy on this, and don’t show the discipline of regular usage over the longer term. Done well, it can pay enormous dividends.
There is a role for advertising in a tough climate, and there are many opportunities to reduce the cost of this. Some great deals can be done, particularly with the trade press – all those companies who are just cutting back will be out of the market.
More than any medium, PR enables you to position your company as market leaders. With less activity in the market in a recession, there is a genuine opportunity to demonstrate thought leadership, and through this to enhance perceptions of your business and your brand. And why not take time to get to know the key journalists better – it will undoubtedly reap long term benefits if there is a true relationship with them.
5) Take time out for internal and external research
It has been said that knowledge is power. I tend to agree! Far too many companies are guilty of making assumptions, based on guesswork, or very limited experience. This can lead to expensive mistakes.
So take time out to get to know and understand your clients, distributors and competitors. Take time to find out and understand what is going on in your markets, and how it is changing.
You should have a thorough understanding of your distributors and competitors. This is an on-going effort – doing it once won’t cut it.
Talking with your best clients to assess what you are doing right , where you could improve and how you stack up against the competition has so many benefits, it is hard to justify why you are not doing it, if you aren’t.. The very process of talking with your clients is a relationship builder, not to mention the value of the information you gather.
This needn’t be a long, expensive project – rather intelligent probing and questioning of the right people. Outside assistance in some form could prove helpful, although it is not absolutely essential. Where the client research is concerned, using an outside firm can have the effect of raising your credibility and making it more likely to obtain completely candid data.
6) Monitor competitors
As explained above. Take time out to find out and understand what your competitors are doing. This can reveal their strategy, which will help you to respond to this, and give you a competitive edge.
7) Improve the client experience
Satisfied clients will stay with you, purchase more from you, and recommend you to others. Most financial services companies are abysmal at this. Stop for a moment and ask yourself this question: “Which financial services have you enjoyed dealing with?” I suspect that your answer will speak volumes. Explore what other industries are doing and feel free to lift their proven policies for delighting clients.
I hope by now that you are considering a different question. That you are not asking “How much of any marketing can I cut in the recession?” Rather that you are asking “What marketing can I do better to make the business more profitable as we come out of recession?”