Marketing amid Recession | Pedal to the Metal

2 December 2008

Do you remember a 1990 film called “Days of Thunder”? There’s really no reason you should. It was dreadful.

Anyway, in the film, Tom Cruise (robbed of an Academy Award in my opinion) and his wife to be, Nicole Kidman, starred in this high-octane, stock-car speed fest. Remember it or not, there’s a scene midway through the film where Mr. Cruise (or Cole Trickle, to give him his hilarious moniker) chickens out whilst rounding a top-bend crash, smashes into a wreck of cars and ends up in traction.

At the climax of the film, we see another top-bend wreck and Cole’s pit boss (the improbably named Harry Hogge) tells him to floor it. He hits the gas, exits the smoke and Cruises to glory.

“O.K., so what the hell has a hick racing film got to do with marketing through a recession?” I hear you ask.

The metaphor runs something like this:

The wreck on the last bend is the impending recession.

The "Mellow Yellow," Cole’s car, is your gaming business.

The accelerator pedal is your marketing budget.

And Cole’s right foot is you.

Last week, Nicky Senyard, chief executive of Income Access, wrote a piece in IGamingNews about best practice in marketing and player acquisition now we’re facing a recession. As usual for Ms. Senyard, the piece was spot on, and the use of a “buy now, pay later” affiliate program is certainly one that should be an integral part of your strategy.

But “part of” is crucial here. Because those gaming brands that increase their integrated marketing and advertising spend through tougher times will be the ones that reap the greatest rewards on the other side.

The problem is, the second you see my biography at the bottom of this piece, you’ll realize that this is exactly what I would say as a marketing guy and you’ll swiftly move on to the next article with a snort of derision.

But hold up.

You run a gaming business. You’ve been burnt before -- I can understand that.

You want proof.

So here it is:

In 1999, PIMS (Profit Impact of Marketing Strategy) conducted a special analysis of 183 United Kingdom companies in periods of recession and recovery. Of that lot, 110 cut ad spends, 53 chose to maintain at the same level and 20 increased expenditure. During the period of recession, the ones that spent more made the least profits.

However, during the period of recovery, the scroungers saw their profit grow by 0.8 percent, whereas the spenders grew a hefty 4.3 percent. This more than made up for the lower profits during the period of recession. As for market share, the cost-cutters saw 0.6 percent point growth against a hefty 1.7 percent appreciation for the spenders, during the recovery period. ?

The study most conclusively proved that the “good” costs that one should focus on during recession are:

Marketing communications
Product quality enhancement
?New product development

Whereas the "bad" costs that should be curbed during recession are:

Manufacturing overheads
?Administrative overheads
?Fixed capital
?Working capital

Whether you buy into this rationale or not, there are some inevitable truisms about a crash circumstance that you just can’t ignore. In simple terms, the opportunity open to you is as follows:

Marketing in a recession is cheaper than marketing when everyone’s revenues are up. Not only can you negotiate more media volume within your budget, but the reticence of the majority of your competitors to rock the boat or take a lead allows you a less-cluttered playing field through which you can add to your player base.

In addition, relying solely on affiliates to generate your new players (who pay for their own acquisition through rake) is simply unsustainable. It’s like Harry Hogge offering a win bonus to his driver then seeing him get in another team’s car at the next race -- just because the win bonus was bigger!

Basically, you should follow Cole’s steps and put your foot on the gas while everyone else is slowing down to avoid the crash.

There is a tick list make sure that this strategy is right for you, however. And this is outlined brilliantly to by Dr Gary Lilien, from Penn State’s Smiel College of Business. He has clarified the requirements of being bullish through harsh economic times: -

Your firm needs to already value marketing. You need a marketing emphasis. You can’t all of the sudden start focusing on marketing – that’s a bad idea.

You need a culture that’s nervy enough to increase marketing. You need the will to do it, which is characterized in research by an entrepreneurial culture. You have to have a willingness to say, “Things are getting bad, should we push harder?” Firms with an entrepreneurial culture are used to doing that.

You need the have the capital. The technical term is “slack resources.” In other words, having the budget to do it

To clarify how the tick list functions for a gaming operator, we’ll look at each point in turn.

Point one: Your aggressive acquisition strategy has to be in place already. Well, all but the most lethargic gaming brand should be able to tick that box.

Point two: Can you legitimately make an aggressive move on your competitors with your staff buying into and rolling out the strategy?

Point three: You need the cash before you can make your move. But hold on a second -- if we believe Casino City stats, then online gaming is still growing exponentially month on month. And unless you have a diamond-walled office or a raging Ferrari habit, you still have at least some of that revenue in the coffers.

So you ought to have the facility to spend it should you have points one and two covered.

Every day, people around the business world groan as they hear about City bonuses and hedge fund managers bucking the economic trend. There’s a very valid reason these people are still coining it in despite losing millions for their firms.

The financial institutions they work for know full well that if they try and save pennies now, their competitors will poach their talent and make them pay in the future. Even if you only consider increasing your marketing and advertising spend as a protectionist device, you’ll still reap the rewards over the competition once the dust settles.

You must recognise that you are now dealing with entertainment budgets and discretionary spend. As such, gaming is certainly not recession proof.

But the ability to benefit from recession is certainly in your hands. An aggressive marketing and advertising strategy is now your ticket to the elite.

Mr. Lang is with McBoom, a digital gaming marketing agency in Brighton.