In an ideal world, merchandising activity would be self supporting, always pay back multi-fold what it costs to execute, and be effective in reaching every potential emptor in the appropriate sphere all the time. But in the world where the sky is blue, merchandising activities are driven by several factors, including perceptions of the company and the head vender there, economic forces that drive consumer behavior of all types and factors beyond your control.
As a result of these factors, merchandising budgets are at the mercy of the reactions of the company to these perceptions. Many of these perceptions are flawed, skewed, marred by history, personal experiences of senior management, and most have no historical precedent or foundation.
Myth #1 - "Our brand is strong enough not to need support for the duration of the downswing."
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Fact: Few brands are strong enough to survive without advertising, product promotion and client service support. Brands are like delicate houseplants - they need attention, support, bolstering, and polishing, (the merchandising equivalent of nutrients, light and water) - or they will wither and shrivel to a shadow of their former self. This is not a position you want your corporate brand to be in when the growth engine for the economy revs back up.
Myth #2 - "If we cut back on merchandising disbursal, we can use the money for other things internally, and increase the budget when things get better."
Fact: Studies have shown that once that budget gets cut, it takes a herculean effort and a strong internal champion to boost it back to its former levels, and even if it does increase, there are much stronger conditions of ROI attached to its implementation. Once those monetary system imagination are allocated elsewhere, they tend to stay there - after all, that other department doesn't want to give them up either.
Myth #3 - "Nobody's buying anything, advertising and promotions are a waste of money."
Fact: Many studies conducted by prestigious business publications and university think tanks have come to the same conclusion supported the data they gathered on U.S. and in some cases global companies: Those that reduce their presence in their key service markets are in a far worse position in terms of profitableness, market share and market competitive presence when the downswing eases and profitableness growth returns than those that maintain their merchandising activity levels. Those companies that are so bold as to increase merchandising activity stand a great chance of taking market share from their less aggressive competitors and can rule the category if the downswing lasts long enough.
Myth #4 - "We can cut back [on merchandising] now, and so work up quickly when things get better."
Fact: This scheme has verified fatal time and again, especially for companies that have inefficiencies inherent in their design, or product delivery channel. That inefficiency won't allow them to "work up quickly", since by that very inefficiency they will effectively always be "late" when timing the market - they are not market leadership but laggards, and thus the ramp-up activity gets started late relative to the buying cycle, and their more nimble competitors have already familiar them to the punch.
Myth #5 - "We should examine what's working for us, and cut out everything else."
Fact: This is not really a myth, but a knee-jerk reaction to a short-term slump in gross revenue gross. Good merchandising departments should be doing exactly that on a perpetual basis, not just when multiplication are tougher. Why would any vender worth their pay continue programs that didn't work, effectively dragging down performance crosswise the board and wasting money.
In addition, there should be prosody built into any campaign so that there is a way to "take the pulse" of its success, and mid-course correction is possible to boost effectiveness and increase ROI on a continual basis. Further, in some channels, there is a accumulative effect that blurs perceptions of what's working and what's not - interdependencies exist between channels that are not planned or regular but that sleep in the client's mind and trigger gross revenue inadvertently. Cutting out what can't be measured accurately hampers this effect, dragging down results with no apparent reason.
Myth #6 - "Marketing spends more money than any other department, they have the most room to cut budget."
Fact: While disbursal may be a measure of power in some corporate structures, at to the last degree informally, return is really what counts when its budget review time. Marketing is one of the few departments that can actually point to contributions they make directly to the bottom line. There is a verified cause-and-effect relationship between gross revenue gross and merchandising expenditure for large and enterprise-size firms. Increased disbursal in the IT department power yield long-term benefits, but better servers don't often move more product, unless the product is server space. Cutting the merchandising budget only reduces the opportunities available to build market share, boost product awareness and memorability upstairs of the consumer, and dampens profitableness in the long run.
Myth #7 - "All of our competitors are pull back advertising and media expenditures to save money, so we should, too."
Fact: This rather lemming-like sheep thinking can destroy your company! Your Mom knew better than this when you used the excuse "All the other kids are going, why can't I?" and her response was likely something on the lines of "If the other kids leap the bridge, are you going to jump, too?" Despite being competitors, their financials likely look a little different from yours, and it's foolish to think that you can mirror their moves and be made - at best you will be equal! The retributive redress here is being accustomed take market share from your more timid competitors, by increasing presence and exposure, and cutting other less-than-mission-critical expenditures for a short period to accomplish it.
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Myth #8 - "We should downgrade the quality of our merchandising materials, use a cheaper creative agency, and mail out less oft to save money."
Fact: This set of moves will actually cost you both in the short- and long-term. You power save a very small additive amount on cheaper paper, shorter, little brochures, cheaper handouts, little tradeshow giveaways - but the damage you're doing to your brand and the resultant poor reflection on the company as a whole does far more damage than can ever be repaired by disbursal those few dollars later to try and fix it.
Not to mention trembling the confidence of your clients by giving them a visual representation of how poorly your company is performing! "Gee, they must be in trouble, this looks like cheap junk. Maybe I'd better take my business to the other company that's likely to be around to support their products down the line," is the thought you're promoting by reduction quality in your in public free materials.
Good design often costs to a small degree bad design, due to few creative iterations, few miscues, greater effectiveness and higher return. Jumping ship from the agency you're with if they are delivering on dollars spent just to save a little money is fool-hardy. The ramp-up time for a new agency to learn your needs, your products, your style and your brand will just about be exhausted by the time the average recession is over, and it will have cost you more to get the same level of productiveness in that time, in the nick of time to reposition for the new economic conditions.
When multiplication get tough, the tough get going in the merchandising department, providing the market with visual evidence of your corporate strength, your leadershiphip role in the sphere, your expertise in the market, and the corroborative strength you offer for your products and services. Don't believe the nay-sayers who want to slash your merchandising budget, reduce your head count and reduce the quality of your materials. Everything you do here reflects on the health of your company, and cutting here shows the most and helps the to the last degree.
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