Lessons from the Recession: How Marketing Practices and Priorities Can Make the Difference
A recent survey by the Alterra Group found that despite the sour economy, a number of professional services firms actually held their revenue steady or even increased it in the past 12 months. What separates the firms that thrive? Our research found that these more successful companies had distinctly different marketing practices and priorities than those whose revenues declined in the past year. Here's a summary of the findings.
The sheer magnitude of the 2008-2009 recession has made things more difficult for all companies, including professional services organizations such as law firms, accounting firms, and consultancies. But has it affected all organizations equally? According to a recent Alterra Group survey, the answer is no. In fact, our research found that while nearly half of the firms polled said they anticipated declining revenue in 2009, a slight majority believed their revenue would hold either steady this year or grow.
Even more intriguing was the fact that firms expecting steady or increased revenue appear to employ some distinctly different marketing practices than those that anticipate generating less revenue this year. Our findings provide some insight into which marketing practices are most valuable in challenging times and can help mute the impact of a downturn on an organization’s overall financial performance.
The Recession’s Impact on Marketing Organizations Overall
Nearly half of the 105 respondents to our survey expected to generate less revenue in 2009 compared with 2008. More specifically, 47 percent projected slightly or significantly less revenue in 2009, 29 percent said revenue would be the same, and 24 percent said it would grow.
As goes revenue, so go budgets: 53 percent said their budgets had shrunk in the past six to 12 months, 26 percent said their budget was the same, and 22 percent said their budgets had grown. And 33 percent of respondents reported layoffs among the marketing staff, while 57 percent said their marketing organization had not made any significant change in headcount. The remaining 10 percent had experienced growth in resources (See Figure 1.)
Shifting Priorities and Marketing Vehicles
Beyond these top-line impacts, the 2008-2009 recession forced subtle yet significant shifts in marketing priorities. Most notably, the downturn has made lead generation and thought leadership more important to survey participants, while it has made brand awareness less important. (Figure 2)
This downward shift in brand awareness is not surprising. In difficult times, it is relatively easy for CEOs and CFOs to make a strong case for shifting marketing investments with longer-term paybacks (such as building brand awareness) to more sales-oriented programs that generate returns in the short term (such as lead-generation programs). However, this research and our experience suggest that in doing so companies risk compromising the overall awareness and health of the company’s brand and making themselves more vulnerable to future competitors—not to mention future recessions.
We also saw changes in the vehicles respondents plan to use to help them achieve their marketing priorities. This year, targeted direct marketing and written materials such as websites, points of view and client case studies are generally the most important (Figure 3). In fact, 67 percent of respondents increased their efforts on revamping website copy and collateral in the past year and 58 percent increased their use of targeted direct marketing campaigns tailored to specific industries or clients.
Conversely, 70 percent of respondents either reduced or held constant their use of firm-sponsored events in the past year—typically a very effective professional services marketing vehicle. We presume this is largely because of the high expense associated with such events and significant travel restrictions placed on many target buyers. However, the majority of respondents (58 percent) plan to increase the use of firm-sponsored events when the recession ends.
While blogging has seen increased use as companies experiment with this marketing channel, it remains the third-lowest priority for professional services marketers. Finally, neither online nor print advertising are highly valued marketing vehicles for survey participants, nor do they appear to be gaining significance.
These findings reinforce the conclusions drawn from past Alterra Group research as well as our experience: that professional services, which are typically complex and largely intangible, generally do not lend themselves easily to being marketed via such channels as advertising due to space constraints (i.e., they are “low-bandwidth”). Instead, professional services marketers agree they need channels that enable them to more expansively discuss their approach to solving business problems—i.e., “high-bandwidth” channels—and, thus, tend to view such things as websites, printed collateral, white papers outlining their points of view on key topics, and other written materials as more important.
Considering Revenue, Compelling Differences Emerge
Beyond the preceding high-level results, we also uncovered insights into marketing practices that could help lessen the impact of a downturn on an organization’s overall financial performance. Indeed, we found several compelling patterns in the answers of the roughly 50 percent of respondents whose companies have maintained or grown their revenue so far in 2009 (the “leaders”), especially when compared to the responses of those whose companies have not (the “laggards”).
At a high level, leaders demonstrate a commitment to balance. In 2008, these organizations spread their resources more evenly across lead generation, branding, thought leadership, and new product introductions than laggards did. For example, in 2008 leaders gave an average priority rating of 3.8 out of 5 to lead generation, versus 3.3 for branding and thought leadership and 2.8 for supporting new product introductions.
In contrast, for the same time period, laggards were more heavily focused on leads (4.1) and branding (4.1) at the expense of thought leadership (3.3) and new products (2.4). In other words, while leaders emphasized all four priorities in more equal measure heading into the recession, laggards were much more narrowly focused on leads and brand building (Figure 4).
In addition to having different priorities heading into the recession, leaders and laggards have made different moves in response to it. For example, laggards say building the brand is 19 percent less important now (versus 4 percent more important for leaders), and new product introductions are 22 percent more important (versus 11 percent less important for leaders). Laggards also say that thought leadership is not any more important today than it was in 2008, while leaders think it is 3 percent more important.
In sum, laggards are shifting the focus of their marketing resources to those activities deemed closest to near-term revenue generation, namely new products and lead generation, at the expense of brand awareness and thought leadership.
We believe leaders have had more success with revenue this year because their approach has more consistently supported the complete process of marketing professional services: Build awareness, create relationships, and find opportunities (Figure 6). This process is effective because it matches how professional services buyers select their suppliers.
First, prospects must be made aware of a firm and be given the chance to sample its expertise through such things as articles, websites and collateral pieces that offer high-level views of what it can do.
If the executive is interested enough in the firm, he or she then will seek out proof of the firm’s capabilities, which is provided by such things as in-depth case studies, white papers, webinars and events that give executives the chance to learn the firm’s perspectives on and insights into solutions to problems without committing to any further discussions. Finally, if the proof is compelling enough, the target executive will want the chance to talk to the firm’s experts live about their capabilities, which provides the opportunity for them to sell new work.
In short, selling professional services is a process, and our study reveals the simple truth that companies that either increased their revenue or held it steady through the downturn did a better job of consistently supporting that full process with marketing in both good times and bad.
The research also shows that a sales-driven model in professional services may work in good times when organizations are essentially “taking orders,” but leaves firms vulnerable when clients become more discerning about the providers they work with. When times are tough, clients tend to choose providers that, in their minds, have the deepest expertise solving the business problems they face and therefore offer the greatest trust that the work will generate its targeted return on investment. This expertise and trust must be proven over time—via compelling case studies and research- or experienced-based points of view—not simply proclaimed in sales literature and ads.
As we conducted our research, numerous observers began claiming the current recession has reached the bottom and that companies should begin preparing for the upturn. Of course, no one knows for sure if that is true. But what we do know is that in good times or bad, professional services organizations such as law firms need marketing that is focused and consistently supported—not marketing that is done “when we have money.”
Today, firms that are struggling to fill their pipelines absolutely must focus on short-term lead generation, as most are doing. However, as they begin thinking about how to rebuild or reinvigorate their marketing capabilities for the rebound, firms should remember that buyers choose firms that have demonstrated expertise, as opposed to simply proclaiming it.
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