Is a recession more efficient for online marketing ?

aotagain · 15-07-08

Mainly considering PPC I suppose but considering what might happen as consumers move through the steps from having a wad of dosh through to counting the pennies...

Step 1 (last 10 years - especially if you worked in financial services)
You've got more money than sense and browse the net buying stuff willy nilly that you don't need. Everyone's happy.

Step 2
You get a bit tight for money at the end of the month, so you do a more browsing and clicking but don't buy so much. OK for you, bit more costly for online advertisers.

Step 3
You have to start working on a budget, so you browse wishfully with no intention of buying. Not much fun for you, but definitely very costly for online advertisers.

Step 4
You get pretty disillusioned with just looking and only go online when you know you've got the cash. Still not much fun for you, but conversion percentage goes well up for online advertisers.

As we haven't had a recession or even a proper 'economic downturn' since the web came of age, does anyone think Step 4 is likely ?

Uncharted territory for everyone coming imo.

Would ebay turn into a pawnbrokers where everything sold for much less than anyone paid for it or hoped to get, damaging its brand for ever ? (As against many auctions reaching silly prices as they currently do).

Time for a beer

Gavinio · 16-07-08

More importantly in times of recession companies turn away from fluffy branding advertising channels in favour of ones that deliver a tangible, measurable ROI and that can even be attributed as a cost of sales rather than a marketing budget.

It's fantastic for online advertising. Not so good if you work in a factory.

joinarcade · 16-07-08

This is really good stuff for online marketing, many thanks for share this.

Regards!

nim-b · 16-07-08

There are a couple of reasons I think online is going to be more 'recession-proof' than other sales channels:

- as people become more price conscious they will go online as its generally cheaper than the high street. This might see the strengthening of price comparison sites or other shopping aggregators.

- online marketing, and especially affiliate marketing, is a very cost-effective marketing channel. It allows retailers to react quickly to the market, put a cap on spending (or set it as a percentage of sale), and easily track results. During a recession slashing marketing budgets is generally not a good idea (you should be marketing more, not less), and online allows companies to invest more without worrying about over-stretching themselves.

Cheers
Naomi

aotagain · 16-07-08

I think those 'in the know' - which is all of us of course ! can see the logic behind online potentially being more recession-proof.

However, in general across retailing do the guys with the budgets really know and understand the online channel enough not to cut online budgets in line with other cuts ?

I'm not sure how much clout the affiliate manager will have when talking to the FD and I'm not sure that boards of directors will react rationally to the idea of cutting brand advertising (which I'm sure a lot of them associate psychologically with themselves) by x% but not cutting online (more detached and anonymous) by the same amount. I've got a feeling that its going to need very good presentation skills by marketing directors to get the point across.

If the bigger company online budgets get cut, it could be a good opportunity for younger, efficient, online-savvy businesses to get sales that would have otherwise gone to high street names.

nim-b · 16-07-08

Quote:

Originally Posted by aotagain

I'm not sure how much clout the affiliate manager will have when talking to the FD and I'm not sure that boards of directors will react rationally to the idea of cutting brand advertising (which I'm sure a lot of them associate psychologically with themselves) by x% but not cutting online (more detached and anonymous) by the same amount. I've got a feeling that its going to need very good presentation skills by marketing directors to get the point across.

I see what you mean, and yes its normally at board level where cuts in budget get decided. However, I'd hope that affiliate marketing, as a cost of sale not a budget-based spend, would have a good chance of surviving the cuts. Although as we all know, there are still companies who set aside a budget for affiliate marketing rather than keeping it open.

I think marketing directors are going to have some pretty strong arguments for not cutting online at the same level as brand advertising. The brilliant thing about online is that you can test activity quickly, prove it works (by attributing sales directly to the activity), and then put more budget into the stuff that's really driving you revenue. Even boards of directors can be persuaded when faced by cold hard facts.

ChrisBishop · 17-07-08

Some great points made and everyone on here knows exactly how pro online (and affiliate marketing I am!) however, channels should never compete and branding is vital for future success of businesses.

Times will be hard for the next 18 months but as ever an holistic approach is required. Why do you continue to buy Apple even though your iPod screen continually cracks but you'd never dream of replacing with a Zen player!

Branding and advertising will certainly need to be more efficient and effective over the next two years however this can never be truly replaced by one specific marketing channel - as we all know affiliate marketing does not work in a vacuum and fundamentally consumers by via brand than channel.

The wary I have with the recession and continued stress on finances is the joy of shopping and especially the wow factor of purchasing that item (whether it is jeans, iPod or vodka!) will be lost and become a commodity item - then we are all in trouble (just look at the insurance vertical!)

Anyway, just playing devils advocate slightly here

Yes, Online Marketing is more measurable therefore we all we be able to demonstrate prudent techniques in these tougher trading times however don't forget the effect of offline advertising and even direct marketing!

tomj · 17-07-08

I know of several massive brands who have already reduced their budgets with agencies by 50% or more.

Time and time again even when the market has been going up too many big named companies capped their CPA budgets and we get the countless threads on here complaining that CPA should have no budgets etc etc....but believe, we are going to see some suprisingly large names slash/pull out of the affiliate arena as spend goes back to what they know in times of recession.....tv being one area. Someone commented to me that TV ad slots are being or are going to be (cant remember which , sorry) cut by up to 40% to get back spend from online to TV.

I think we are definately about to see what happens online in a proper recession for the first time but to assume online will be more recession proof than other media's is naive imho.

If you look at the exposure to the credit crunch average Joe Bloggs has and the effect it has on them, UK PLC and its media spend is tied in to the same cycle so we are no way immune.

nim-b · 17-07-08

Quote:

Originally Posted by tomj

I think we are definately about to see what happens online in a proper recession for the first time but to assume online will be more recession proof than other media's is naive imho.

There's an interesting article in todays Marketing Week that covers a lot of the points discussed in this thread.

One main point was exactly as you say- its impossible to predict what will happen with online because it hasn't been tested in a true recession yet. What happens with Google spend is going to be particularly interesting- will people start searching for products less as they cut their spending?

There's also a lot of talk at the moment about the possibility of the recession curtailing the growth of social media, in that most social sites haven't yet managed to work out a concrete monetisation method. Advertisers are even less likely to take a punt on a new site in the current economic climate, and if the banks come calling it could lead to a few sites dropping off the radar.

I don't think anyone believes that online is going to be recession-proof, but I think its going to be effected in very different ways to other media. Should be interesting....

aotagain · 17-07-08

Quote:

Originally Posted by tomj

back to what they know

That's the human nature bit that's niggling away at the back of my mind.

I still think computers and the internet are a bit alien to a lot of people - you only have to watch a few non-teccie people sitting in front of PC's.

But then perhaps I would think that as I was at school when you had to punch a stack of cards and send them off to the local college before discovering that line 355 had an error that stopped the result of 1+1 being calculated properly !