Crisis in Communications: Marketing Follows the Market
November 17, 2008
Principal, Diversified Management Resources
All it takes is an historic "adjustment" in the financial markets to remind marketing directors how vulnerable their departments and budgets can be. As revenues drop, they're painfully aware of the ubiquitous question chief financial officers are inevitably asking: "Can't we downsize and make do with less?"
Just as with every other business function, a company's investment in marketing inevitably follows the market. In this market, many companies will be inclined to view their marketing budget in particular as largely expendable, a luxury rather than a necessity at a time when shareholders are cashing out and wholesalers seem to have little they can sell.
However, slashing marketing staff and programs won't help companies address a primary concern, as highlighted in a recent survey we here at Diversified Management Resource Associates conducted to help fund firms find ways to stand out from the competition through more effective marketing communications.
In fact, cutting too deeply may trigger a crisis in communications, hampering a money manager's ability to offer distributors and investors the timely information and reassurance they'll need if they are to stay the course. Poor marketing support and communication leads to loss of more customers, with a consequence of further revenue erosion down the road.
Regardless, whatever the outcome and duration of the current crisis, in all but a handful of money management firms, tomorrow's marketing budgets will be leaner than today's.
What's to be done? Through our survey, "Helping Asset Managers Stand Out Against the Competition: The Role and Use of Technology in Marketing," more than 100 marketers and other industry professionals representing 58 companies told us they do have specific ideas about steps their employers will likely take to reduce expenses. Some of the answers are predictable enough; others are surprising.
Naturally, headcount is the first line item executives scrutinize when revenue forecasts won't support current expenses. Most of our survey participants said their company would defer hiring of additional staff and hire fewer contract or temporary workers. When the survey was taken, admittedly before the current market collapse, less than 20% predicted cuts in the full-time staff.
Their answers also told us that there will be a renewed focus on operating efficiency, particularly within marketing departments. Many firms plan to reduce communication costs through additional outsourcing and automation.
Further discussions with senior marketers and executives told us that cost concerns may propel outsourcing to a new level. John Drachman of The Drachman Group said, "Marketing directors will aggressively reorganize their key internal administrative and creative talent to maintain critical functions in-house while outsourcing the rest."
Using freelance creative talent is nothing new. However, Drachman and other industry consultants predict that entire core marketing functions-like product development, sales literature program maintenance and marketing research-will now more commonly migrate to 1099 employees or agencies. This might be done to manage overhead costs while improving results, as outsourcing can provide access to more highly skilled experts on a pay-only-as-needed basis.
Most marketing departments are using marketing technologies, and likely doing a great job with them for content management, web development and management, podcasts, e-mail, and much more. Nonetheless, some standard marketing department activities are still ripe for automation.
Survey participants told us that, on average, nearly 40% of their staff resources are focused on purely administrative or production functions. The scope of the potential savings available through more comprehensive automation of literature publishing, for example, is impressive when you consider that many companies regard each full-time employee as representing up to $200,000 in overhead cost. Maybe some of that overhead allocation for marketing production would be better spent where it will have direct impact on customers.
Michael Zimmer, president of Fluent Technologies, our survey sponsor, noted that more than half of the companies told us they produce their time-sensitive communications, such as in-depth fund commentary and quarterly plan reviews, manually, through desktop publishing. Most marketers are dissatisfied with the timeliness and accuracy of vital performance communications prepared this way. Reengineering this process, through the use of automated database publishing tools readily available today, may reduce costs and administrative headcount while delivering product stories to the market faster and more reliably.
Will outsourcing and more efficient business processes be enough to keep marketing programs intact through the current market collapse? From today's vantage point, the answer isn't certain. What is certain is that the most successful marketers to emerge from the crisis will be those who are more creative, not only about the themes and content of their marketing communications, but also about how the work is done.
Charlie O'Neill runs Diversified Management Resources, a marketing and executive search firm. He also runs Money Management Executive's job board, mmcareers.com. He can be reached at firstname.lastname@example.org. Copies of the survey are available at fluenttech.com.
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