Using market fluctuations to drive marketing budgets may put long-term brand health at risk.
The ag sector is no stranger to the boom and bust cycle. And as strong as the ag economy was in the prior decade, it has been struggling more recently. While logic would suggest cutting brand support budgets during a downturn, there is a growing case that sustaining brand support may pose greater long-term potential.
The importance of farmers’ sentiments regarding the ag economy was the catalyst that recently brought Purdue University and CME Group to develop the new Ag Economy Barometer. The study is based on an ongoing, monthly survey of 400 U.S. farmers to gauge their attitudes on the ag economy.
The recent report indicated an optimistic change, the first in some time. Optimism on improving commodity prices appears to be the key driver for the shift. In addition, favorable weather conditions in much of the U.S. accompanied by weather challenges in South America also played a role.
And while this is good news for ag marketers, should our budgets to support brands in market be so directly tied to these near term fluctuations and the resulting farmer optimism?
How should marketing budgets tie to sales?
Businesses in agriculture tend to initially scale back marketing budgets during times of down sales in an effort to maintain profits or even limit losses. But is that the right strategy for the long term?
When commodity prices are high, farmers tend to buy more – with or without a marketing message to encourage them. However, tough times may be the best time ever to invest in marketing and sales efforts: downturned markets represent the optimum time to show empathy and offer farmers counsel and cost-effective solutions for their operations. In doing so, the company stands to build relationships, business and market share.
We, like farmers, have seen enough history to know there are cycles in agriculture. Times get tough. Times get better. If marketers invest in customer acquisition during down times when their competitors are slashing budget, then with continued good service and marketing, they can expect to retain those customers when good times return. And with those good times, prices rise. They have more customers and reap sales increases from both more customers and, in most cases, higher prices for their products and services. It’s a long-term strategy for increased growth.
Investing in good marketing might be better viewed in the same way we approach investing in R&D or product development. Most companies avoid making significant cuts to these last two areas, as that can severely limit long-term growth. If we view branding efforts through this longer-term lens, we can begin to see the risks of making significant cuts in marketing based on shorter-term challenges.