The sad state of marketing in June 2006

We officially announced the new Blackfriars Marketing Index last week, noting that it rose to 146 for Q2. We're still working on getting the press release out, but I thought I would try to give people a flavor of the current state of US marketing as the result of analyzing this data for the last two months. And by tapping all our resources of sophisticated statistics analysis, deep marketing expertise, and decades of writing and analysis, we've been able to sum up the Q2 state of marketing in the US in a single sentence:

US marketing has a serious case of the blahs.

Our data shows that marketing budgets and spending have gone pretty much nowhere but down over the last three years. Actual spending in Q1 2006 was about 54% of an average quarter in 2003. And while Q2 planned budgets are up significantly, the real question is not whether companies will under-spend those budgets, but rather how badly they are going to under-spend them.

Now, I'm sure some skeptics will be sitting back and saying, "Is that so bad? Frankly, I can't see what we get from those millions spent on marketing other than ads." I know other executives who when asked about marketing say things like, "I don't need any #@#$% marketing; I need sales! Lets take those marketing budgets and spend them on sales people." In both cases, these executives don't understand marketing's real role in business. It's really simple, actually.

Marketing's role is to identify what customers want and to serve those customers at a profit.

Now while that's a simple statement, there are three important parts to it:

1. A set of customers. You can't be everything to everyone. To market successfully, you have to identify a subset of everyone that you can satisfy and delight; otherwise, you are doomed to failure.


2. What customers want. Products are only a piece of this. Customers may want everything from whiter teeth to better relationships. Good marketing helps customers understand how what your company does makes their lives better.


3. Serve those customers at a profit. I always say that there's a large set of customers that want a $5,000 Lexus LS430. Unfortunately, that would be hard to deliver at a profit.

So if businesses are under-spending on marketing, what does that mean? It means three things based on the definition:

1. They aren't identifying the right customers as much. It costs money to identify and target customers. Companies that don't do that identification broadcast their message instead. That means their business becomes less efficient.


2. They are providing less of what customers want. The only way to deliver what customers want is to communicate with them regularly and ask. Companies cutting back on marketing tend to cut this first. It's a bad sign.


3. They aren't going to be as profitable.. With poorer targeting and a vaguer idea of what customers want, businesses won't deliver as reliably on their brand promises. That means profits will decline over time.

We'll see how accurate this prediction is, but the marketing numbers we're seeing today say that we're about to see a pullback in the US economy over the next six to twelve months. And given the shortfall in Q1 marketing spending, it may not be a small one.

But there is a bright spot in this forecast: companies that spend aggressively on marketing during recessions do very well when the economy recovers. In the last pullback, it was Apple that spent marketing money and triumphed with the iPod. Stay tuned: we may see some new market leaders emerge from this.

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