No gifts this Christmas?

By Macharia Kamau

During the festive season, companies give gifts to their employees, business partners and key customers not only as a gesture of goodwill but also to build brands.

This year, however, many might have to do with diaries and calendars as gifts. Others might just get a ‘thank you’ note tucked in greeting cards.

This would be a break from shopping and holiday vouchers or expensive wine bottles that have seen companies spend on ‘gift baskets’ for staff and customers.

That is the extent to which companies have been hit by hard economic times in the last two years and cost cutting has become a catch phrase in the business world. Brand building activities have been major casualties of cutbacks.

Commenting on marketing and advertising trends this year, Mr Joe Otin Synovate Kenya’s Media Monitoring Division director noted that challenges dogging both the local and global economy had seen many companies only spend when it is necessary.

"Many companies have staggered advertising expenditure," he said.

Reduced earnings

Mr James Ngomeli an advisory member of the World Brand Council said many employees could go home without a Christmas package from employers.

"Workers have to forego some of the end year benefits, especially if they are working for firms that have recorded reduced earnings," he said.

Ngomeli said it would be unwise to do the same with business partners and customers, noting that gifts are important for client retention .

"It is easier to negotiate with employees but customers expect relations with a company to get better with time and in worst case scenario remain the same.

If this is not the case, they might just go shopping for other business that might give them a better deal, including emotional reassurance," he said.

"Branding is all about perception and if you look good in turbulent times, it is likely that customers are going to stick with you. They are seeking reassurance and not whining from companies."

marketing budget

Ngomeli added that an overall cut in marketing budget would have an impact in the sales volumes of a product and that intensifying marketing activities when other firms are toning down.

"A product’s visibility in the market must be maintained even in economic downturn," he said.

"There is a direct correlation between marketing budgets and number of products moving on the shelves and a cut in budget will lead to reduction in the volumes moved."

While the global recession has been cited as among the key reasons companies are tightening budgets, there have been challenges unique to the local economy that have seen companies post marginal returns in the last two years.

These include a prolonged drought, the post-election crisis early last year and sustained high level of inflation, which have resulted in reduced consumer spending that has in turn affected the profitability of many companies.

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