News
The Marketing Crunch
23rd October 2008
The last two weeks seems on one hand to have shocked us all and on the other hand we appear to have become almost punch drunk on the daily news of more banks being bailed out...
This continual stream of negative news has almost stopped any other news making the front pages. The Conservative conference continues but they have not had the gift of a slow news day to get their message across. In fact the shadow chancellor looked and sounded completely out of his depth when actually put on the spot about the current banking crisis.
If I were to be unkind I don’t think he really understood the maths. But in reality if we look back at conservative shadow chancellors including Michael Howard, Michael Portillo and Francis Maude none of them actually have accountancy backgrounds so why would they really understand the inner dynamics, I am not sure all the traders and bankers actually understand the dynamics of the market, which is probably why we are where we are.The Paris motor show opens, Google launch their new phone and things continue, but there are some big issues on the way, the number of redundancies not just in the city but in retail and manufacturing continues to increase on a daily basis.
Tesco announces even bigger profits and you wonder what type of contracts they are offering to suppliers at the moment.So with my marketing hat on where does that put brand Britain? Well I am going to coin a phrase now which you will hear again and it sums up what is about to happen in the Marketing services sector. Welcome to the ‘Marketing Crunch’ or ‘Brand Melt Down’. We are going to see some big failures in this service sector and it will be a combination of over supply and not just reduced budgets but no budgets at all. Fundamentally there are too many brands chasing too few customers in every sector from food to DIY and electricals and as we know when the economy slows advertising is generally the first causality.There is just too much choice and the choice of product comparison websites just makes choosing even more difficult.
The consumer is now so overloaded with branfds it is difficult to make any choice at all, and now there is an incentive not to choose so guess what? No sales.But this was going to happen anyway even without the banking collapse. Rather like estate agents digital marketing companies can be set up by anyone with a bit of programming knowledge and an eye for design, no marketing, brand, or advertising knowledge needed. This has meant that websites and digital marketing has been one of the cheapest parts of your marketing budget but what are the results?
Now this is tricky many marketing people say that their ecommerce web site work and they are profitable and due to the measurability of the media they can prove it and its true the increase in online sales has been amazing 56% year on year, but in reality it is still just 10% of the UK retail sales and Ebay, Amazon, Tesco, and Argos account for over ½ of this. So specialist retailing on the web is just that specialist and in this new down turn that is coming many of these web companies who run these small ecommerce sites are going to go to the wall, leaving those retailers high and dry.
What is even more worrying is that marketing graduates who would have trained conventionally have focused on online marketing and few understand the real process of managing brands in a conventional sense, and many of the traditional full service advertising agencies have found their traditional customers move their accounts to digital agencies. So we have knowledge gap as well. Add to this the fact that the number of brands carried by the likes of Tesco will be reduced in a recession (you only need to look at Lidl and other pallet shifters to see that most consumers will be happy with less choice when times are hard) to realise that there are going to be mass casualties in the branded, food, fashion, garden, DIY and gifts market. This will have a knock on effect in distribution and packaging industries all creating a massive marketing crunch.
- Argos 12%
- Amazon Sites 11%
- Tesco Stores 6%
- Littlewoods Shop Direct Group 6%
- Play.com Sites 6%
- Apple Computer, Inc. 4%
- NEXT Group 4%
- Ticketmaster 3%
- Groupe PPR 3%
- The Carphone Warehouse Group 2 %
Online sales by percentageThe survivors as ever will be the multinational brand owners, and those manufacturers with world wide markets. For survival it is crucial that companies look very closely at the core USP of their products, perhaps cut out brand extension products and focus on less products more closely targeted.
Having the ability to sell direct and via all types of retailer both bricks and mortar and online will soften the blow. Getting clever and personal with consumer communications will be even more important. Relying on the supermarkets to carry you through the bad months will just not be an option.The time has come when only the brands with a real reason to exist will be with us in 12 months time and this is how it should be in a proper market place. We are currently so ‘over branded’ it is confusing the market. What’s for sure none of these failing businesses will be able to go running to Government to be nationalised even if they employed 1000’s of people.
So how does a business survive the marketing crunch? We will finally see a backlash online where the price comparison sites and affiliate driven sites will just fail to be a sound business model as the amount of online advertising will reduce inline with sales volumes. Will we see the current acceleration of online sales volumes slow down because of reducing credit limits on credit cards?
If the high streets retailers are devastated with old favourites like Woolworths, Boots and WHsmiths maybe disappearing will we just see further increases for Tesco, Sainsbury’s and Morrisons with the web taking its share of orders.If this happens will we see the likes of Tesco offering a range of designer brands and specialist goods through their portal offering a one stop shop and zero delivery costs? Free delivery is something which most small online retailers are unable to afford. What can a specialist retailer offer online in such a crowded online market and how will you find them, especially if your broadband provider convinces you to sign up to a ‘tailored pipe’?
That is one that watches what you do and tunes what you see in return for a free connection or other incentives. As a small retailer you then have to work with Google and the broadband suppliers just to get access to a customer base. So what will the online and offline landscapes look like in 12 months time? I guess that Google will still be calling the shots and let’s hope that Microsoft having brought back $40bn dollars of their own shares will start fighting back and give us some alternatives maybe around mobile web and social networking. In the meantime get some brand new ideas from Greenfield!
Comment?
Send your comment for publishing on the Greenfield blog here: blog@greenfield.co.uk
Bookmark with: