MAINTAINING MARKET LEADERSHIP IN A TURBULENT ENVIRONMENT

INTRODUCTION

The President and Chairman of Council, Mr. Tony Agenmonmen, the Vice Chairmen and other Council members, the body of Fellows, fellow practitioners, members of the Press, distinguished ladies and gentlemen. I will like to warmly congratulate the members being admitted into the Fellowship category of the Institute, and wish you all the best. I also want to thank the Council for inviting me to deliver this paper.

It is official. President Buhari has confirmed what we knew all along, and were apprehensive about: Nigeria is in a recession, and possibly one of the worst in the nation’s history, made worse by an economy that had performed poorly in the last 24 months, and then weakened by Covid-19 in the last three quarters of 2020.

In every recession, marketers find ourselves in poorly charted waters because no two downturns are exactly alike. However, in studying the marketing successes and failures of dozens of companies as they have navigated recessions from the 1970s onward, we have identified patterns in consumers’ behaviour and companies’ strategies that either propel or undermine performance. Companies need to understand the evolving consumption patterns and fine-tune our strategies accordingly.

Of course during recessions, consumers set stricter priorities and reduce their spending. As sales start to drop, businesses typically cut costs, reduce prices, and postpone new investments. Marketing expenditures in areas from communication to research are often slashed across the board; we all know that in many instances, such cost cutting decisions are indiscriminate, and can even be a mistake.

Although while it may be wise to contain costs, failing to support brands or examine core customers’ changing needs can jeopardize performance over the long term. Companies that put customer needs under the microscope, adjust rather than cut or remove the marketing/promotions budget, and nimbly adjust strategies, tactics, and product offerings in response to shifting demand are more likely than others to flourish both during and after a recession.

WHERE ARE WE?

If we are going to be discussing survival tactics and how to maintain leadership in this very uncertain environment and situation, we necessarily need to understand some details about the operating environment, so that in discussing possible solutions, we will be closer on target.

Locally and globally, economies are at their poorest in more than a 100 years. Even before the C-19 Pandemic, the global economy had looked shaky as the price of oil wobbled. More so for Nigeria as oil and gas remain our mainstay for cash. Income from Brent at a point went as low as sub $10 when we had unsold cargo on the high seas and even with a $5 PB rebate we were not getting buyers, and were paying heavily for the storage on the high sea as local storage was full. Price now hovers around $40 PB, and is likely to remain here for many months.

This situation has affected everything from government revenue to financial services, FMCG, other services etc. In Nigeria, while the telecoms appear to be very active in this season, they also will be affected if people are not working and earning. The issue of opportunity cost comes in: should I buy a recharge card or a loaf of bread for my family? If we look at what happened in Venezuela, a major oil producer like Nigeria, when it went through its crisis, even telecoms were severely affected.

The Bretton Wood institutions, IMF, World Bank and other local assessors had predicted that our economy would contract in 2020. Moody’s had also predicted a negative economic outlook for Nigeria. Many even worried that there was a strong likelihood of a default in our obligations if not well managed, and IMF and co are closely watching our capacity to continue to meet our debt servicing obligations.

Sadly, Nigeria has become a net borrower again, and recently collected another tranche of $3.4b from the IMF, with another application pending before the World Bank. The implication of sustained borrowing is more pressure on our income when we service the loans, leaving nothing for infrastructural development. The global financial community is likely to come to our rescue: IMF, World Bank, ADB, the Chinese etc. They cannot allow the Nigerian economy to go belly up, as this can lead to many things, including unrest and political turmoil that can spread to and have a serious ricochet effect on the sub region all the way to the Gambia.

As a run up to the end of 2020, we are likely to still be cleaning up on the effects of C-19, except the vaccine has come out; indeed, the whole world, and Nigeria are bracing for a major round of lockdown again. In 6 months, it’s almost certain the world will have a vaccine. Then we must begin to look at repairing our economy. So in essence, we are looking at a tougher time the rest of 2020 and the first two quarters of 2021, during which we cannot meet our projected growth forecast and will now be lucky if the economy grows by 1%. At the start of 2020, Nigeria was forecasting economic growth of 7%, but most observers found this estimate over-optimistic. In January the IMF forecast economic growth of 2.5% in 2020 and in 2021. This would be below sub-Saharan Africa's average growth rate of 3.5% in both years. The good news is that if some urgent structural changes are made, we may experience recovery from the end of Q2 2021.

POSSIBLE IMPACT ON THE MARKETING INDUSTRY

What are the likely possible impact on the Marketing industry? The industry will suffer serious reverses associated with the general business environment, and specifically targeting the marketers. While we are a critical sector of the economy, we will sneeze as the overall economy catches a cold. Some specific effects are likely to result in the following:

Slow or negative growth in an industry already seriously affected by the weak economy in the last several months leading to a further contraction. We may witness fewer investments in the industry at large because of low ROI. We may also experience disruptions in operations, like salary cuts and adjustments, as income drastically reduces and we may even see many companies having no choices than to retrench.

In the midst of this uncommon level of uncertainty, there are certain imperatives the marketer must grapple with. These include, but are not limited to these three critical considerations:

1.  CHANGES IN MARKETING AND MARKETING COMMUNICATION ECOSYSTEM

2.  HOW TO EMBRACE THE CHAOS AND RE-BUILD, and,

3. HOW TO MANAGE NEW IMPERATIVES FOR GROWTH

1)  CHANGES IN MARKETING AND MARKETING COMMUNICATION ECOSYSTEM

The changes in the marketing ecosystem are internal and external, and reflect in the overall effects of globalisation and the roles and influences of the brands and marketing efforts. This will affect the network of suppliers, distributors, customers, competitors etc., as they strive to deliver value. Each component will affect and be affected by the others, creating a constantly evolving relationship in which each entity must be flexible and adaptable in order to survive as in a biological ecosystem.

Add to these the blend of new businesses where for example hitherto financial services firms are now becoming fully integrated with marketing and marketing communication. The effect of new marketing trends like digital and its strong performance against the traditional media, the changing customer profile and the joint effects of recession and Covid-19 are challenges the marketer must manage.

2)  HOW TO EMBRACE THE CHAOS AND RE-BUILD

The rules have to change and indeed have to be re-defined; we must separate the chaff from the grains because we are faced with too many principles; we must determine which ones work best at minimum cost. We need a re-learning of the customer and his profile and the operating environment etc. All traditional stakeholders and new ones must be involved: the Client, Creative Agencies, the Media, the Digital, the Telecoms, the Consulting Firms etc. Welcome to a new world!

3)  HOW TO MANAGE NEW IMPERATIVES FOR GROWTH

The COVID-19 global pandemic has resulted in changes to Marketing, Marketing Communication, Promotional and Media spends, forcing businesses and brands to re-evaluate our thinking about current and future marketing campaigns. While brands currently seek to strike the right tone, the future points towards market alteration, increased competition and a demand for creative and aggressive marketing practices. Many businesses are re-evaluating their marketing and media spends and have refocused their budgets and efforts in an attempt to generate a sustained stream of consumer interest and spending, while maintaining sufficient returns on media spends.

As companies grapple with what the future will look like, several issues come to the forefront for the Marketer:

1.  How do you sustain the brand when markets and consumers are reshuffled?

2.  Whether to develop new products that align with a "new reality", especially VFM brands

3.  How to deal with the competitive landscape when consumers' spending habits are fundamentally altered

4.  How brands can address consumer concerns about health, wellness, community, personal fulfilment etc.

These issues will require and lead to the following fresh strategic thinking:

1.  How for example can a major and trusted brand develop an effective business strategy in the midst of growing government regulations and intervention?

2.  How do brands promote a product or service in the midst of the COVID-19 crisis in a way that resonates with consumers?

3.  How does a brand communicate with consumers in an effective way after fear subsides and a sense of "normality" returns?

4.  Beyond communication, how does a brand engage consumers to promote spending on the brand's products?

The issues are interesting and challenging. To maintain market leadership, I suppose what is most critical first is survival. So in responding to that expectation, I will spend a bit of time on what marketers (and their agencies) need to do to survive these challenging period and from it we will be able to also see some tips on maintaining market leadership.

In responding to this, I have had to also look at what certain strong organisations outside our shores are doing to find solutions to similar challenges. And since marketing principles are generally applicable across markets, I will share some of them and hope we can adapt them in our local environment.

How have market leaders like Wal-Mart and Amazon been able to survive and maintain their dominance? They focus on implementing a single strategy more effectively than their competitors, and as market leaders, meet and exceed customers’ expectations.

A turbulent environment exists when changes are unexpected and unpredictable. The key issues concern the nature of the pressure for change and the speed at which the organization must be able to respond and act. Market turbulence is often a time of wide swings. These leading organizations have been able to succeed by employing the following key success factors:

1.  STRATEGIC PRICING

Companies that succeed through this, offer quality products with guaranteed low prices, convenient services, or both. They target those customers who are concerned with finding the lowest prices. Although they compete in a variety of industries, these companies have at least one of four activities in common:

a)  They have minimized costs by managing and optimizing their supply chains and fundamental services.

b) Their operations are mechanistic, involving standardized, centrally planned, and tightly controlled operations.

c)  Management focuses on discovering new ways to integrate operations in order to increase reliability and decrease transaction time.

d) They develop an organizational culture that rewards efficiency and detests waste.

2.  SUPERIOR PRODUCTS OFFERING

To succeed with superior products, companies challenge themselves to develop highly desirable goods or services that are sometimes untested in the marketplace; this talks of product innovation. The thinking is simple. While the customer profile is changing, there remains a constant: the customer doesn’t want to pay much, but is still interested in quality products to wash clothes brighter, quench thirst more effectively, drive pains and headaches instantly and more effectively, etc. The marketer is therefore challenged to keep pushing this and innovating.

3.  STRONG HUMAN CAPITAL POLICY

A key factor for success revolves around the company's human capital. To properly create a culture of innovation, organizations must hire and retain appropriate employees that will foster creativity. They need to be highly flexible, cooperative with others, and able to work in teams. Moreover, they must be open to criticism and unafraid of failure. Successful ideas are rarely perfect at the moment of their conception. Rather, weeks, perhaps months of trial and error are needed to properly develop a lucrative product. This reality requires companies to focus on long-term results rather than short-term profitability. They must reward success, and not necessarily punish failure, but as part of innovation, investigate it. Experimentation fosters the innovation that will give the company the above-average profits and market leadership it desires.

4.  RELEVANT CUSTOMER RELATIONS STRATEGY

For many companies, the key to creating value for their products and services during this challenging period is in effective customer relations as they build bonds with customers. If the axiom, “The customer is king” was ever relevant, now is the time.

The marketer must also micro manage the customer by going beyond what a market broadly desires to focusing on the specific needs of the individual customer. Constantly modifying products and services to meet and exceed the expectations of customers allows companies to develop the greatest asset of customer loyalty. Rather than increase transactions from a wider consumer base through broad marketing and advertising campaigns, consumer-oriented organizations must cultivate relationships with current customers to achieve repeat sales. They will differentiate themselves by offering conveniences or modifications specific to the customer that competitors will not. These sometimes simple alterations make the customer feel valued by the marketer and decrease the probability of a competitor stealing them away.

To succeed through customer-orientation, companies need to consider and experiment with more decentralized decision making structures. Employees dealing with customers must be empowered to make appropriate decisions regarding customer demands since they deal directly with them. Every interaction with a company employee affects, for better or worse, the customer's perception of the organization. Because of this fact, organizations need to properly motivate employees with appropriate incentives that reward strong efforts at customer retention.

Finally, let’s look at a few tips on what needs to be done by Marketers to sustain what I have presented so far when making or reviewing our marketing plans:

1.  Research The Customer 

So much in the last couple of months has happened to those customers you thought you knew. You need to literally get to know them again. Instead of cutting the market research budget, you need to know more than ever how consumers are re-defining value and responding to the recession and instability. Price elasticity curves are changing. Consumers take more time searching for durable goods and negotiating harder at the point-of-sale. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today's can-live-without. While trusted brands are especially valued and can still launch new products successfully, interest in new brands and new categories may be fading. Conspicuous consumption has become less prevalent.

2.  Review Current Relationships With Some Strategic Partners

These are very unusual times when very tough decisions need to be taken by Marketers to survive and maintain our positions. Globally, Clients are reviewing their relationships with their Ad Agencies who were appointed when things were easier and demands were not so critical. Every serious Marketer now needs not just a Creative Agency, but an Agency partner that is also strong in marketing principles and practices. The thinking is simple: the season calls for partners that can reason with you because they have the knowledge, expertise and experience in marketing, and not just because they produce fine creatives. They need to understand the challenges the economy, our industry and our brands face, and so must be primed to offer reliable support and solutions. Smart Agencies are prepping already and training their people to connect with this new reality.

3.  Be Careful About Cutting The Marketing Spend

Friends, this is not the time to cut advertising and promotional budgets indiscriminately. It is well documented that brands that either sustain or even increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the re-assurance of known brands, and the conviction for new ones, and now with more consumers at home watching television, can deliver higher than expected audiences at lower cost-per-thousand impressions. Brands with deep pockets may even be able to negotiate favourable advertising rates and lock them in for several years. However, if for unavoidable reasons you have to cut marketing spending, try to maintain the frequency of advertisements by shifting from say 30-second to 15-second materials, substituting radio for television advertising, or increasing the use of direct marketing, which gives more immediate sales impact.

4.  Take A Hard Look At Your Product Portfolio

Marketers must re-forecast demand for each item in their product lines as consumers focus more on value. Tough times favour multi-purpose goods over specialized products, and weaker items in product lines should be pruned. Industrial customers for example prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety, and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, may still be introduced, but advertising should stress superior price performance against value, and not corporate image.

5.  Support The Trade

Distributors and the entire trade line must be supported. It’s a good investment. In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy incentives, extended financing, and generous return policies motivate distributors to stock your full product line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardize existing relationships and your brand image. However, now may be the time to replace your weaker distributors and upgrade your sales force by recruiting those who are good but were sacked by other companies because they could not maintain them.

6.  Adjust Pricing Tactics. 

Customers will be shopping around for the best deals. You do not necessarily have to cut list prices, but you may need to offer more temporary price promotions, reduce thresholds for quantity discounts, extend credit to long-standing customers, and price smaller pack sizes more aggressively. In tough times, price cuts attract more consumer response and support.

7.  Stress and Emphasize Core Values

Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners, and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees. Economic recession can elevate the importance of the Finance Director's balance sheet over the Marketing Director's income statement. Managing working capital can easily dominate managing customer relationships if care is not taken. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.

Finally friends, whatever your faith is, if you believe in God, don’t ever stop praying; some of these challenges will require divine intervention!

Distinguished colleagues, ladies and gentlemen, it’s a period none of us has faced before and we hope ideas such as these and more will help us navigate this unchartered territory. I congratulate all the fellowship awardees, and wish us all a great afternoon.

God bless you.

‘Lolu Akinwunmi, fnimn, frpa

Group CEO, Prima Garnet Africa

Past Chairman, Advertising Practitioners Council of Nigeria, APCON