Out of the Box

Government Money or Marketing?

By Menachem Lubinsky on February 09 2009

These are no ordinary times in America, as everyone knows by now. After all this is a time when financial institutions that were considered the pillars of the financial world like Lehman Brothers came crumbling down. These are days when government is bailing out banks and auto manufacturers.

This unusual economic climate has raised a rather interesting question: “Should institutions receiving government bailout money be allowed to conduct business as usual when it comes to marketing?” Should they be allowed to spend to brand themselves as they normally do?

Bank of America recently sponsored a five-day carnival in conjunction with one of the nation’s leading sporting events. This major sponsorship would never be questioned in the good times. It is consistent with effective branding and extremely common. But in this environment, Bank of America was severely criticized for spending money on the sponsorship when it was the recipient of a $45 billion taxpayer bailout.

General Motors was a bit more careful, announcing that it was scaling back its sponsorship of the event. Consumer groups and even members of Congress called these sponsorships “wasteful and in bad taste.”

It is almost surreal to imagine that such institutions as Bank of America and General Motors now need to clear their marketing behavior from consumer groups and critics that were normally reserved for institutions that were always on the receiving end when it came to government funding. What is even stranger is that the critics seem to be saying that these institutions should forego their traditional marketing efforts, especially if they are receiving government money.

Here is where the marketing experts weigh in to support these institutions. It would seem that a primary objective of the bank and the auto manufacturer is to capture or recapture greater market share in an effort to bounce back to their former healthy state. The bank should be spending more money on branding to attract new customers and to vie for a leadership role in the financial world even in this recession. Thus, the experts would say, the criticism is ill advised and ill timed.

General Motors has its work cut out for it as American are buying far less luxury items, particularly automobiles. But yet, people are buying other cars, particularly the foreign imports. It would seem that GM should be making a special effort to attract some of the buyers of the competitors. The marketers would say that they should come up with a message that will encourage buyers to buy the American cars. So again, what’s wrong with its being a sponsor of a major sporting event that reaches millions of American consumers?
Marketers would go a step further. They would say that what is unacceptable is when a company like GM that is a recognized institution in the US and has always invested a great deal into branding suddenly withdraws. They are in fact counseling many other companies to step up their branding in a recession so that they emerge on top when the better times roll in.

To be sure, many large companies are scaling back their marketing. Macy’s recently laid off 7000 people and at the same time retooled its advertising to focus on local markets with a “My Macy’s” campaign. But the net effect was a major reduction in their national advertising.

With this in mind the critics may be saying that Bank of America and GM should at least follow the spirit of many other mega companies and not conduct business as usual. But then again, these aren’t ordinary companies. They are institutions that were directly and severely impacted by the recession and require more than the usual attention towards recovery. Perhaps a major portion of the bailout money should have been used to intensify the branding effort.

Bankruptcies are not necessarily products of recessions. They are common even in the best of times. So when a major manufacturer of sporting goods went bankrupt, the first action that the company took was to completely cut out its marketing budget. Instead of righting the ship, an interim manager found himself sinking even deeper into debt and the company ultimately closed. A marketing specialist later wrote that he was firmly convinced that had the company stuck to its branding program that it might have survived and even come out of bankruptcy. Several major airlines like Delta did just that and emerged from bankruptcy.

The knee-jerk response of many business experts who are not necessarily marketing savvy professionals is to immediately place the ax on branding and advertising when a business is in trouble. They somehow believe that “fixing” other aspects of the business should come first. The problem is that the end user has many choices and does not necessarily have to wait until the company decides to renew communications with the end user.
One might argue that Bank of America and General Motors could have resorted to far less costly marketing initiatives at a time when the taxpayer is funding their very existence. That may be, but there must be some element of trust in the marketing professionals in both companies that they have thoroughly researched their best shot at reaching the most people.

The problem with branding in a tough economic climate is that it is impossible to track in a short period of time. In other words, if a member of Congress were to ask Bank of America how many new accounts they picked up as a result of the sponsorship, it would be difficult to answer. Branding is a long term objective that works remarkably well over time, but when it is missing for a prolonged period of time, the damaging effects can be almost instantaneous.

Out of the Box is a collection of strategic marketing articles that Lubicom has published on various topics, trends and ideas in the marketing world. The articles have been published in the Hamodia weekly newspaper circulated on three continents to a readership of well over 100,000.

The name, "Out of the Box" is a term used frequently in business nowadays to describe creative thinking that is not the norm. It is meant to help a business pull away from the pack or separate oneself from the competition. It is to some extent fraught with risk, simply because it is not the run of the mill thinking, but it is at the same time the key to reaching the next opportunity.