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Memo To The Ceo: Do Not Turn Off The Marketing Tap

Find a creative way to maintain flows into your mission critical marketing assets, in the face of exogenous shocks.

Marketing is a discretionary profit and loss statement item, one of the first to go, in tough times in most companies. In most firms and geographic markets, the marketing budget co-varies with economic activity and/or company fortunes. In other words, marketing budgets, generally go up or down, in line with economic activity and/or company performance1.

Unfortunately though, to remain in the game or to retain a winning position, in good or bad times, the business or brand franchise must be strong enough hang onto, grow or bounce back grow pre-exogenous shock Customer Lifetime Values (CLV). Since CLV activity is realized through and facilitated by off balance sheet, intermediate brand related intangible assets such as; prompted or unprompted awareness, confidence, trust and interest etc., and also that all assets, intangible or otherwise, depreciate (not in the accounting sense) over time or are subject to normal wear and tear, these marketing assets need to be maintained or upgraded in good or bad times. Net, some level of re-investment needs to be maintained, regardless.

In the face of the COVID-19 pandemic outbreak, its rapid diffusion across the world as well as the almost uniform national policy responses to manage the spread and gear up health systems for the pandemic, most countries instituted social distancing and varying forms of lock-down. As a consequence of this, economic activities in consumer discretionary GCIS industry sectors and categories as well as some categories within the industrials sector, were halted whilst some essential GICS sectors were left either fully or partially open. As a result of this, most firms in most industry groups and categories were caught between a rock and hard place. On the one hand, demand side activity and revenue dried up or reduced, whilst on the other hand, they continued to incur expenses (COGS, operating expenses and financial expenses).

Faced with the above situation, some firms, especially those with high asset betas were left with no choice, but to de-leverage their operational load factors. Since the marketing budget, a part of SG&A, is largely a discretionary item, some firms switched off their marketing activities altogether whilst waiting for some signals to ascertain whether the second wave will materialize and what the policy response will be. There is no guarantee however, that the off balance sheet, and intermediate intangible assets that facilitate customer and consumer activity will stand still during this “wait and see” period. As the saying goes, nature abhors a vacuum and during a business franchise’s absence, something may pop up and fill the space, especially during this time when consumers are dealing with their health, economic and social anxieties, fears and uncertainties.

The reality is that volatility, ambiguity and uncertainty induced by combinations of exogenous factors acting in concert, are now becoming a new normal, as Darwinian patterns of change (stable periods followed by small or incremental variations over long periods resulting in something new) either give way to or live side with punctuated equilibrium (stable periods followed by rapid bursts of change) as well as, technological change at an industry level that follow what Tushman and Rosenkopf referred to as an era of incremental change, followed by and era of ferment and then a dominant design.

Indications from “rapid bursts” of exogenous and industry level shocks as well as firms’ attempts to adapt to these shocks, suggest that most GICS industry sectors, categories and stocks/firms are now in an era of ferment. At some point however, industry sectors and stocks/companies will emerge with a fit for purpose “dominant design,” whether that be in the form of a new business or operating model, with some elements of either being reinforced and others being reoriented.

Net, instead of switching of the tap altogether, marketing should find innovative ways to maintain optimal flows to keep the mission critical “marketing assets” alive and current. This is more so that the lock-downs and the slews of health related pre-cautions temporarily changed customers and consumers’ established habits and practices. Your business franchise absence could reinforce the new habits and practices that consumers picked during the lock down period.

In addition to the above, the business case to find innovative ways to maintain flows into mission critical marketing assets makes sense. Firstly, since many categories and firms would have cut back on their promotional activities and marketing spend, this means that; 1) there is a strong possibility that it would cost less now than pre-COVID to buy the same exposure; 2) since there is reduced promotional clutter, you may need fewer exposures to break through and be seen or heard; 3) empirical evidence shows a strong link between increased marketing spend and increased market added value during recessions than non-recessionary periods.


  1. (Date accessed, 02 July 2020).


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  7. Romanelli, E., & Tushman, M. (1994). Organizational Transformation as Punctuated Equilibrium: An Empirical Test. The Academy of Management Journal,37(5), 1141-1166. Retrieved July 2, 2020, from
  8. Edeling, A., & Fischer, M. (2016). Marketing’s Impact on Firm Value: Generalizations from a Meta-Analysis. Journal of Marketing Research,53(4), 515-534. Retrieved July 2, 2020, from
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Is your business ready for a rollercoaster ride?

Volatility is is here with us. Stock market indices, S&P, Dow, Nasdaq, CAC, FTSE etc., swing from pessimism, cautious optimism and optimism. The same applies to private companies, households and consumers.

Each swing correlates with propensity to buy, spend or sell on the side of different market players. Is your business ready and geared up for this rollercoaster ride?

Who is willing to pay for an equity position in your business?

No matter how strong the fundamentals of your business are, it is always advisable to get a sense of what the market thinks as well as the value that the market attaches to your business and the industry sector that you play in. Most importantly though, it is particularly critical to obtain some insights about the segment of the market that would have an interest in your business and the sector that you play in and why.

Most family business owners in the lower mid market get to a point where they want to sell or dilute their equity position in their business for one reason or another, but do not know how to go about doing it. Some approach this assignment the same way they would sell their house or property, whilst others get their lawyers or accountants to try and sell their business. One year or 18 months later, and after seeing lots of potential suitors, most of these business owners are still no where close to closing deal, but worse, given the amount of time spent in the market “throwing mud at any wall” and hoping that something will stick somewhere, they have now “commoditised their” asset, and this makes it difficult to generate interest in the business.

Our counsel is as follows:-

    • Speak to the right people early on, this will save you a lot. Selling a business is a specialised skill and you need to the right people. Equally, selling a lower mid market family business with own peculiarities, is a different kettle of fish.
    • You need to target. That requires you to speak to people who understand the market, but more importantly, the strategic buyers or financial buyers who would be interested in your business and why.
    • You need to test the market long before you go to market.

Should you be interested to test the market, please get in touch with us on


Exogenous shocks, firm position, market reaction.

Strategy 101 exhorts managers to keep tabs of both the proximate and the task environment and to be on the look out for events that may threaten or present opportunities to grow the firm’s operating performance, improve Return on Invested Capital (ROIC) or widen the spread between ROIC and cost of capital.  In this regard, time, effort and money was not spared. Most managers and owners have a firm grasp of these drivers as well as their broad behavioural patterns or plots and have built their models on this plots. Nothing however, seems to have prepared most to make sense of and deal effectively, at least in the short term, with multiple exogenous shocks (health crisis, economic policy responses to the health crisis combined with technological disruption, environmental and social challenges) either acting in concert, feeding off one another or working parallel one another.

Like most things in life, the COVID-19 induced health crisis and associated policy responses presented some industry sectors, industry groups, sub industries, categories and stocks/firms with tailwinds and others with headwinds. The industrials sector, specifically, the airline sub industry as well as consumer discretionary sector, specifically, casinos and gaming, hotels, resorts and cruise lines and leisure facilities, are examples of the former, whilst health care, consumer staples and some sub industries within communication services are examples of the latter. Firms within these sectors or sub industries are exposed to the same level and intensity of of headwinds or tailwinds, despite this, stock markets assign different opinions and place different bets to firms facing the same headwinds or tailwinds.

To illustrate the point, all casino and gaming firms could not trade due to lock downs instituted in different geographies and post lock-downs, they will be expected to institute some health safety measures and social distancing measures to protect clients and workers.