Tight times and skinny wallets ahead
I give the advice in this column on a regular basis. Now seems a good time to repeat it. If you have read this before, take it as a reminder.
There is a high likelihood of tight times and skinny wallets ahead. Firstly, currency forecaster Cees Bruggenheim sees the rand touching 15 to the US dollar by 2018, possibly 22,50 depending on how the SA economy is managed. That impacts all dollar denominated imports.
Secondly, to continue developing, Namibians can expect substantial increases. So far, electricity will go up severely. The need for serviced land will probably push up municipal rates. Any delivery of affordable land or housing will likely reduce household budgets in other areas. Water needs are also on the horizon.
Thirdly, the plunge in oil prices will impact on our cousin economy Angola, and may reduce the size of that cash inflow.
In the fourth place, the rain doesn’t look good, so the household budget may well be reduced by additional household dependency from rural areas.
Any of these factors or a combination of them points to reduced revenue, and cuts. The traditional approach to this scenario is to make cuts to anything that is not perceived as core business. Usually the first thing to go is spend on communication. This is entirely the wrong approach. In fact, communication has to be stepped up to better preserve the business, defend market share and, depending on the approach gain market share.
Constraints force the consumer to make conscious decisions based on cost. These decisions are presented to the consumer in several different ways.
The first type of decision is whether to spend, or not to spend. The second type of decision is the choice between products in the same category, for instance this brand of food or that brand of food. The third type of decision is to make a choice between different categories, for instance buying a cooldrink or shelling out on airtime.
Correct communication can influence all of the outcomes in the above decision, and gain share of mind, even market share for the communicator.
The core message must be value, that the brand supports the consumer and his / or her lifestyle. In academic terms, the consumer seeks out the particular brand on the basis of needs and wants. The message of value confirms the consumer’s choice and validates the spend, when there is enough income to justify that particular spending. If the consumer lacks the income, then the message of value will remind the consumer to return under better circumstances.
The question of offering value through discounts or savings must be evaluated carefully, because it can put a crimp in operational returns, and begin to introduce the idea that the brand is excessively profitable. Value is often perceptually determined by cost. Discounts and savings should also be carefully weighed up against the prospect of attracting a market based on low-cost products, rather than intrinsically valuable aspects of the product.
If there is a need to reduce spend on communication, the best method of achieving the cost cut is to consider spend on media channels. Consider the overlaps between various mass media channels, and reduce budgets on mediums that are more targeted to a narrower group that is more likely to spend, rather than achieving marginal gains by multiplying media expenses. Also pay close attention to niche media that can reach specific target groups.
Consider particularly social media, that can reach highly targeted multiples of thousands for N$10. If you have been reading my columns, you will know I am talking particularly about Facebook.
The core to the last few paragraphs is being able to identify your markets and how they are reached by media.
If you handle the next few years well, there is a distinct possibility that by communicating value, you will retain your core market, and possibly even grow at the expense of those who handle the challenge in a less capable manner.