Hi-tech Companies determining Advertising Tactics for Slow Economy

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Over the past few weeks, hi-tech companies have had to try to determine what type of advertising tactics to execute during the economic slowdown.


More direct marketing and less branding, or vice versa? Cultivating an existing database, targeting new prospects, or a mixture of both?


Though some companies have had to scale back and make adjustments to their marketing strategies, others have been able to continue with business almost as usual.


IBM, which launched a $110 million worldwide integrated advertising campaign last week, planned for a slowdown in the market, allowing it to execute such a large campaign. But the company needed to implement new tactics to pull it off.


"For the first time we are running a campaign marketing our four major product groups within the same themed campaign," said Mark Rosen, vice president of integrated marketing communications at IBM Software Group, Somers, NY.


Rosen said IBM was able to spend that amount of money on a campaign because it created a business plan that would allow the company to manage and regulate its marketing tactics.


Greg Fisher, director of marketing at Vizium, Framingham, MA, said his company's business is booming because people are shifting from advertising to direct marketing. Vizium is an online direct marketing consultancy firm that works with several hi-tech companies.


"There is a general reduction in advertising spending and a funneling of those funds into more direct channels," Fisher said. "Companies are also looking to run pay-for-performance programs and renting lists on a cost-per-acquisition basis."


Fisher said he still sees companies targeting an equal mix of existing customers and prospects, but they're doing it in a more cost-effective manner.


"E-mail newsletters are being used more often and should be looked into by those not using them," he said. "They provide content that consumers are looking for while pitching a product at the same time."


Howard Sewell, president of Connect Direct, Redwood City, CA, a full-service ad agency specializing in direct marketing for hi-tech companies, said many of his clients are using e-newsletters to stay in front of customers and prospects.


He said the need for running direct campaigns, whether via mail or e-mail, is more important now because market conditions have caused companies to focus even more on profitability.


"Those companies that need venture capital funding have to provide quick results to show lenders they are profitable," he said.


"Our customers are moving away from branding and less response-oriented marketing and more toward direct mail and e-mail," Sewell said. "Our business has exploded because a lot of small companies need to show people who provide funding more results and more quickly."


Net Perceptions, Edina, MN, an e-marketing software provider, said it changed its marketing strategy about a year ago.


"Instead of painting a broad stroke over a large group of people, we are targeting a very specific group of prospects," said Chris Moran, vice president of marketing at Net Perceptions. "We are not trying to find 10,000 leads to put into a basket. And over the past few months we have become less open to experimentation and new things. Right now we want to stick with what we know works."


Net Perceptions recently shifted from targeting pure e-commerce companies to targeting multichannel retailers. While it still maintains an even mix of branding and direct marketing, both of which Moran said are needed, Net Perceptions has scaled back its marketing budgets to meet its current revenue objectives.


"But we feel investing in our marketing initiatives is as important as ever," Moran said.


For those companies that perceive it would be safest to target only its customers and current database of prospects, revenue is not the only thing stock analysts look at, said Dave Holmes, senior direct manager of direct response marketing at Ariba Inc., San Francisco, a BTB e-commerce software provider.


"Wall Street also looks at the ability or inability of a company to penetrate certain markets and acquire new customers," Holmes said. "Companies are now going to have to get better at cross-selling and upselling, as well as do a better job of acquiring new clients."


He said it may be cheaper to generate additional revenue from existing customers instead of bringing new ones in, but there are ways hi-tech companies can bring in new clients in a cost-effective manner.


"Using e-mail newsletters is something that a lot of companies have started doing, and it's a great way to keep people informed," he said. "Leveraging partnerships and running joint marketing programs with other companies is another cost-saving approach."


Holmes said he also thinks more money will be put into innovative, attention-getting direct marketing campaigns.


Others think that running advertising campaigns and working with ad agencies isn't the way to go. Instead, several firms are working with public relations agencies on ways to get their company's name mentioned in a news article or analyst's report.


One of the companies doing this is Adlex, Marlboro, MA, a Web and enterprise management software provider.


Rich Harrison, vice president of marketing at Adlex, said the benefit of working with a public relations agency is that it allows him "to use them when I need to and not have to pay them while they aren't doing anything. This provides a very flexible work environment to operate in. And as unpredictable as the market is these days, that's what I need."


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