Marketing In A Downturn Economy - Your Ticket To Survival And Success

While your competitors are cutting down their marketing spending, you will do better if you keep your brand, product or service in front of your audience throughout the recession. Market share is won during downturns. If you play your hand wisely, your company will come out of a downturn in better shape than before it.

The first reaction of many companies to dwindling business due to an economic downturn—such as the one we are in now—is to cut advertising and marketing spending. Or they may try to slash their prices to keep buyers active. Or they let employees go to save fixed costs. Does this sound familiar?

Although all of these methods may at first seem to improve profitability, they may seriously hurt your business and your market share. Let's examine the threats a little more closely.

No visibility, no business

Because your customers are trying to save costs as much as you are, they need to be constantly reminded of your existence and the benefits you can provide them. If you reduce your marketing spending drastically, you will completely disappear from their sight. How will that make them buy from you?

Low prices will stay low

Companies who go the price-cutting way may at first have success in getting sales during the recession. This, however, is a double-edged sword. First, does the price cut really result in so much more sales volume that it will produce better income than keeping prices at their present level and accepting the drop in volume?

You should also consider what will happen when things turn for the better. How do you persuade your customers that the product they bought for X dollars a couple of months ago is suddenly worth X + something today? Plus, if you slash your prices, there's always a competitor who can slash them even more, leaving you stuck with both non-existing buyers and a low price.

Kick out your experts and you will have none

While trimming the fat is a good idea (although you should have thought about it in good times, not only in the face of an economic downturn), don't resort to panic tactics in your Human Resources. If you let your experts go to save money, you will have no experts available when business turns for the better. Hiring is a long and costly process and may significantly slow down your recovery.

Note also that "experts" in this context does not refer only to management. Especially if you're running a high-tech business, your skilled line workers are just as important—if not even more important. Why? Well, for example financial management is pretty much the same, whatever the business. But manufacturing may require a special skill honed to perfection just for your product.

Lost market share is difficult to get back

The most important thing to take care about is not letting your market share slip. If you lose market share during a downturn, it will be many times more difficult to win it back when business is starting to go better.

So, how can you avoid these pitfalls?

Strike a balance between brand promotion and short-term sales

While you need to keep your company name or brand visible to your customers during a downturn, you should focus on actions that bring you income in the short term. In practice, if you're now mainly promoting your brand, keep some of that promotion, but increase your relative spending on activities that will bring immediate results.

Focus on existing customers

Chances are that your business follows the 80/20 rule that many businesses do: 80 per cent of your business comes from 20 per cent of your customers. Pay attention to your existing customers. Find out how your product or service could be of even more use to them and modify it accordingly, if possible. If it can't be modified, find new angles on how your product can serve them in ways that brings them more profits or other benefits.

Use your marketing budget more efficiently

Now is the time to forget about "this is the way things are done in our business". What you need is maximum return on the minimum of investment.

1. Communicate!

Keep yourself in front of your buyers. Portray a solid brand while finding new ways to shape your marketing message to resound better with your existing and potential customers. Do this regularly to show your interest groups that your business is still in the game.

Make a point not to forget internal communication. Studies show that employee commitment tends to increase during bad times, but you will only be able to capitalise on that if you establish two-way trust. Inform your personnel regularly on what's happening, how your company is doing financially and what you expect from the future. People are not stupid: they will understand that layoffs are inevitable if your regular messages to them has made them aware of a worsening trend over time. If you keep people in the dark and then suddenly sack a number of people, it will only incite anger and get you bad publicity, however good you may think your reasons are.

2. Skip the expensive, embrace the inexpensive!

If you're now relying on trade papers or television to deliver your marketing message, consider more inexpensive ways.

Direct mail works well, whether by ordinary post or e-mail. Instead of costly international trade fair participation, organise your own "shadow" show in a hotel suite at the fair location coinciding with the main event.

Let customers come to you instead of you going to the customers: arrange road shows and seminars instead of sending your salespeople to knock customers' doors. An additional bonus is that when you invite your customers to your own show, they are more alert and won't be distracted by your competitors' messages like at a trade show. Organise your own events or sponsor a major event. In brief, see whether below-the-line activities could bring in the same amount of business as your present above-the-line activities.

3. Learn!

Put your own and your marketing department's time to good use: study what your customers' challenges are and find ways of explaining why your product is the right one to meet those challenges. Focus on those properties in your product or service that will help the customer save money or make more of it.

4. Innovate!

In your marketing communications, do something your competitors wouldn't even think of. Instead of what is expected of you, or what you have grown accustomed to, do it differently.

If you feel your advertising agency isn't producing what you expect, consider working with a network of freelancers. Their overhead is way below that of agencies, and in most cases, you can work out a lump-sum cost for your assignment instead of hourly rates. Freelancers don't have their coffee breaks at your expense.

Or change your message. Approach your customers in new, more personal ways. Find out what makes your customers "tick" and capitalise on that.

5. Educate!

Expect more of your marketing and sales staff. In many companies, "sales" still means sitting behind a desk and waiting for orders to come in. Hire a competent consultant and teach your workforce to make cold calls, find new opportunities, upsell, expand on all possibilities they have.

Besides educating your staff, also educate your customers. Start collecting feedback: organise customer surveys to find out what your customers' problems are, and based on the findings, provide them with information on how your solution solves those problems. White papers and special reports are a good way of doing that.

Change your marketing from a one-way street into two-way dialogue. This will establish stronger trust and show you care about their success.

6. Focus on ROI!

Don't accept your bosses' demands that X per cent of costs must be cut. Justify the cost by the amount of expected revenue. It doesn't matter how much you invest in your marketing if it brings back income that gives you a better margin. What should matter to you is 1) how much it will cost, 2) how much it will bring in.

Maintain Share-of-Voice and you'll maintain Share-of-Market

Let's first get the terminology straight. Share-of-Voice (SOV) means your share of the visibility in the market you compete in. In other words, your marketing and advertising in relation to the entire marketing/advertising cake in your business.

Share-of-Market explains itself: your share of all business in your sector of industry.

Where it really becomes interesting is that keeping your SOV above your SOM will in the end result in growing market share.

One percentage point of SOV over market share will bring in 1 additional percentage point of market share each year. An example: if your market share now is 30% and your Share-of-Voice 25%, raising your Share-of-Voice to 31% and systematically keeping it at that level allows you to expect 31% market share the next year.

In a nutshell, if you are more visible than your competitors, you stand to improve your market share, downturn or not! An added bonus is that visibility during a downturn will position you as a solid, reliable business partner among your customers and make them more interested in buying from you during hard times than from someone who is barely visible at all.

Survival in depression means success in an upturn

To summarise: if you continue marketing consistently, with innovative solutions and lower expenses, you will not only survive through the depression, but come out of it in better shape than many of your competitors. Perhaps with improved market share, better image among your customers, better business and, most importantly, with better income.