Sub-prime marketing is over

Derek Williams, former Managing Director of Cadbury Schweppes, and veteran of recessions past, takes a look at the current scene and offers some tough advice.

WE ARE AT the beginning of the age of spectacular discontinuity, where the past is no longer a safe guide to the future. As companies rapidly prepare for defence or survival, all tests are now ‘suitable for purpose’ ones.

For most marketers, this will be a test of survival management as the organisation takes stock of itself and prepares for a new future. It will be a period of rapid and constant adaptation. We never get back to where we were on the old escalator.

Consumers are already using their savings to cope with the costs of standing still, and when it gets beyond that they will begin rationing themselves. Consumers will change their needs and behaviours rapidly because the pleasure principle of recent times will not be with us for some time to come. For business, this can be an incredibly exciting time. Here are my tips for survival.

Criteria of adaptiveness

Once your organisation is strong on adaptation, you will find that the rate of learning and the behaviour change in the organisation becomes faster than the rate of change outside, and internal flexibility will be greater than external turbulence.

The human race has survived turbulence only through adaptation; the same goes for organisations. Some of the changes required to come out the other side are shown below (see Table 1).

Operating plan vs budget

You may need to have a budget, but have an operating plan as well. The operating plan can be less optimistic on performance and can set out resources and costs at lower levels. If there is an upside it will be small, and productivity will have to take care of it.

The operating plan gives departments money for resources but that amount is also expressed as a percentage of the assumed revenue. Budget holders have to assume revenue may be lower so as a contingency they have to have savings ahead of the game.

Nilum spendum – at all times throughout the organisation

The false Latin is mine but the law is Peter Drucker’s: ‘What is the minimum I need to spend to avoid serious malfunction?’

Hold your nerve marketing

The good times are over and we are likely to have too many products, prices and packages. And much of our activity is sub-prime: high risk, high spend with low or no margin, and subsidised by the core products and packs.

Concentrate on your best performers and support them. But keep your price and avoid price wars. This is the blood stream of the company, particularly when the costs of staying in business are rising unpredictably.

Appoint a pricing manager

Find a very good, cold-hearted operator, who will ride hard on pricing. He will be the gold prospector. He will find gold in pricing that’s not being implemented and then can really make savings. This senior manager is a source of joy and salvation, and will be seen often in the office of the MD.

Fewer and better

There will be headcount casualties: not just redundant jobs but redundant skills in people that are no longer relevant. The rule is you cannot cut too far – but you won’t anyway. It is crucial: headcount attracts activity, which attracts cost. Always feel free to look for new money for proposals. Much as you might want this to happen, you cannot give more resources if the operations plan doesn’t allow it. But you can have all managers examine what is in their budgets: how long ago was that cost acquired? Is it still better spent that way than on the new proposal?

Conclusions

Forecasting darkly always sounds melodramatic, writing lists always seems simplistic and generalising over the whole industrial spectrum can be naïve. But to survive you have to have an adaptive organisation that will work out its own philosophies and programmes.

I have always found that management learns brilliantly on the run – momentum is precious and brings its own insights and wisdoms.❦