Managing Marketing Dollars in a Downturn

As competition for consumers’ dwindling disposable dollars intensifies, retailers take very different routes to improving –or even hanging on to –their market share. Some retailers are stepping up marketing plans while others are pulling back, and, in some cases, exploring longer-term tactics.

Macy’s, which in 2006 announced plans to wean consumers from frequent sales, is not doing so now. Sales and promotions abound, and, according to published reports, the initial plan has been pushed back until consumer spending begins to pick up.

When it comes to aggressive marketing, “retailers that have sharply defined who they are are way ahead of those that appeal to the great masses,” says Bill Bishop, chairman of Willard Bishop LLC, a Barrington, IL-based retail research and consulting firm. “When they have already differentiated themselves, they can use marketing effectively to reinforce their strengths.”

He cites the Wawa, PA-based Wawa convenience store chain as one example of a retailer that can benefit by ramping up its marketing now, pointing out additional benefits, such as a savings of time. Trader Joe’s also has an opportunity to build on its established value proposition, according to Bishop, who also mentions Aldi. The Germany- based giant grocery chain known for deep discounts now has about 850 units in the US.

“Aldi has a clear identity,” Bishop points out. “Alerting people to the fact that they are rock bottom in price probably justifies some advertising.” Aldi, incidentally, goes beyond groceries with weekly special purchases, which the chain touts, “can be anything.” Anything during Easter week included a wood breakfast nook for $149.

“If you have not differentiated, advertising dollars work less well,” Bishop tells GlobeSt.com. “Any sales generated from ads have to be offset by the prices the retailer needs in order to get (those sales). Stores need to be very clear-eyed about what they can do to drive incremental sales.”

If the foundation for an effective marketing program has not already been built, Bishop suggests, “it’s probably better to tighten up, control costs and batten down the hatches. Companies will be exploring lower cost ways to serve customers.”

He points to a time when pumping your own gas would have been unthinkable. So would banking without ever talking to a person. “There will be a lot of shifting in the delivery of goods and services to a lower cost proposition,” he predicts, stressing that the cost reduction cannot sacrifice the product or experience.

Bishop also sees opportunities in an increased bundling of services between brick and click. Citing Famous Footwear, he notes, “a lot of people order online. Order three pair; take back two.” The retailer gets another shot, “while taking the two back to a store, the customer may buy something else,” he reasons.

As gas prices head toward $4 a gallon, he points to another strategy on retailers’ minds. “A store’s adjacency and relationship to other retailers becomes increasingly important,” he points out. On the belief that gas prices are unlikely to go down, he says retail chains and shopping center owners will be looking to provide consumers with a “more efficient driving loop.”