It's a recession! How many times have you heard that recently? The answer: probably thousands. Every newspaper and news programme seemingly has an unending list of recession related stories; "the longest recession ever", "the deepest recession since records began", "the worst recession on record".
Batten down the hatches, cut costs! The approach taken by many businesses in a recessionary environment is to batten down the hatches, cut unnecessary spending, reduce non-essential investment, eliminate waste and focus on the key priorities of the business. Believe it or not, these are good things! They help to develop leaner more responsive, more profitable businesses for when the good times return – call it natural selection for businesses if you like – only the good survive.
However, for many businesses, particularly Small and Medium Sized Enterprises (SME's) which have developed in primarily niche vertical markets, they consider their investment in marketing (product, services and brand) to be non-essential. As such, a lot of businesses are reducing their investment in marketing, focussing on selling and reducing costs.
Wrong, wrong wrong. Whilst for some businesses that will be the best option, for many others it is not, and could indeed be damaging long term for that business and its prospects. The recession, whilst generally being bad for the majority of businesses and consumers, does offer the switched on business some great opportunities though.
Marketing can help deliver those opportunities, and the rest of this post focuses on the three key reasons why you and your business should continue to invest in marketing during the recession. Were not suggesting that nothing should change, we are all under pressure to reduce costs and expenditure in times of reducing margins, but your focus on marketing your business, if anything should increase. By all means market more effectively, make those pounds shillings and pence stretch more, but don't lose focus on marketing.
Reason 1: Generate new business!
Generate new business? You must be mad! There's a recession on don't you know? How on earth can you generate new business in a recession???
True, there is very little "new" business around, in terms of business that was not there before the recession. However, probably like your own business, many businesses and consumers out there are looking at reducing their costs, in terms of can they continue doing something or purchasing something, at a lower cost or with increased functionality (which in turn would reduce overall costs to them).
For the average consumer on the street this might mean doing the grocery shopping at a discount retailer rather than at a premium supermarket, or for a business, reviewing their supplier list in terms of looking at cheaper alternatives or reducing the cost of the product or services those suppliers are providing.
Consumer review – the opportunity exists In simple terms, the recession is causing a lot of consumers to review their existing commercial relationships. Be those relationships with a mass market retailer or a bespoke web design agency.
Nothing too insightful there you say. Until you consider how hard it is to get a consumer (either a business or a person in the street) to change their purchase habits normally. If a consumer is generally happy with a service, they will very rarely change (even if it's more expensive!). However, the recession is causing consumers to do just that.
Coupled with the fact that many businesses are too complacent when it comes to looking after their customers (i.e. expecting to maintain existing margins on business during a recession), there now exists an excellent opportunity to generate new business – to steal business – from your competitors. Provided, that is, you are prepared to compete on a cost basis, or on a "perceived value" basis.
Consumers are now in the market reviewing their relationships looking for lower cost alternatives. If you can provide that, then you have an excellent opportunity to win more business. But you need to get your message across, you need to aggressively (dependent on the market) get your message out – you need to market yourself. Develop a strong cost or value based customer proposition and get it out to your potential customers.
No need to despair, it's not all about money… Compete on cost? You must be mad! We will be trapped into a price war, our margins will be destroyed!!!
True, if you don't thinks this through, you can end up in a difficult situation where you're selling at low (possibly unsustainable) margins, and then subsequently find you can't easily increase prices when the good times roll. However, there are ways you can counteract this.
Firstly, review your proposition and understand your potential customers, can you cut out the frills without compromising the customer offer? Thereby reducing the cost of your service whist still giving your potential customers what they need. To do this you need to know your market, your competitors, and most importantly your customers. Spend time researching them all!!!
Secondly, consider introducing new customer time limited discounts. Yes you will get a hit on the margins initially, but longer term, when the customer has become entrenched with you – the margins will come back up.
Thirdly, think about how you present and market your business. Can you do it in a way that seemingly offers better and greater value to the customer than your competitors? Can you add extras to your offering which whilst cheap for you, could be expensive for your customers (think banks offering free accidental insurance on purchases etc.)
Reason 2: Protect your own business! Read above and reverse it! For every one of your competitor's customers reviewing their providers, yours are too!!!
You cannot sit and do nothing! If you do, you run the very real risk of allowing your competitors to steal your customers away from you.
True, there are some customers who probably cost you more in terms of time and resources than you actually make from them, but that's for a different post.
So, what can you do to stop your customers defecting? Well…. Firstly – get to know them better, research them, talk to them, find out what's going on in their heads – are they feeling price pressure? The process of researching your customers will tell you a lot, not only how to retain their business, but hopefully, how to sell more to them as well!
Secondly – develop relationships with them. The more one to one relationships with your customers you can generate the better. If you have a personal relationship with a customer, they are less likely to defect, even if it is in their interests to do so. Building relationships and trust is key, to a large extent, this is what a "Brand" is all about.
Thirdly – reinforce their purchase decisions! Don't let your customers think their making the right decision in using you, tell them they are! They need reassurance that you are the best provider for them. If they feel reassured that they have made the right decision, they are less likely to review that decision, even on a cost basis. A key part of this during a recession is to make yourself visible, with so many businesses retrenching or going bust, you need to be out there shouting from the roof tops that your still here, offering a great service, and providing what people need!
Fourthly – be aggressive! Don't wait until you start seeing defections to a lower cost competitor, by that time it's too late! Pre-empt any price competition, but do it on your own terms. It's no use just cutting prices if you haven't got external pressure to do so, that just reduces your margins and makes you significantly less profitable.
You need to know and understand your market and your competitors. Don't necessarily jump straight in with a price cut, think about the ways you can generate and retain business with any price cuts you might introduce. Consider discounts, they can be time limited "20% off this weekend", or targeted at new customers "new customers get 10% off" or targeted at existing relationships through loyalty schemes or other limited term discounts. However, do your math first! Don't go offering discounts your business can't afford!
Reason 3: Prepare for the upturn…. Growth is coming! There will be an upturn! Well, the politicians keep saying so, and there never wrong…?
The economy is cyclical, periods of growth followed by periods of retrenchment. Politicians might have thought they had consigned this to history, but it's too deeply ingrained, and is too psychological to be influenced by economic policies alone. Anyway, at some point, probably relatively soon, the economy will start growing again.
What this means is that you and your business needs to be in the best position to take advantage of that growth. When your customers and potential customers start thinking again about taking on additional products and services, you need to be there in front of them, ready and willing to do business with them. Remember, there is a lot of latent demand in the market, a lot of customers have put off purchase decisions during the recession, and waiting until economic conditions give them more confidence to spend there well earned money.
However, the thing about latent demand is that the purchase decision isn't made once the consumer decides they can afford to spend the money, the decision is made in the run up to that point. In other words, those decisions are being made now.
So what must you do to be ready for the upturn, when it comes?
Step 1: maintain your market profile – keep advertising, keep your customers and potential customers aware of your products and services, just because there not making those purchases now, doesn't mean there not making decisions! If you do need to reduce costs, look at cheaper more effective means of getting your message across, look at online marketing, review your website (search engine marketing), use the local press (usually much cheaper than national alternatives), if your market is local even consider sponsoring a local sports team. But above all, keep your profile strong.
Step 2: build your relationships – relationships are critical at any point. Usually, they are quite dynamic in terms of you give, you get (i.e. you put the effort in, and you get a reward – say business), however in a recessionary environment they might become less so. However, they are critical for the future success of your business.
We are not talking about taking your customers out for dinner! Relationships can take many forms, if you can manage a relationship electronically through your website and associated systems – fantastic! Otherwise, start talking to them, send them reminders, emails and get well cards! Remind them that you are there, that you have provided them with good service before and that you will do so again. Reward them for staying loyal, consider discounts or added extras (an added extra is often worth more than a discount, is often perceived as better value, and may cost you less).
Step 3: capability – make sure that you have the ability to deliver on your promises! Many businesses will have cut to the bone to survive the recession, and will only make a limping recovery, if at all, after the recession. You need the latent ability in your business to provide for the anticipated extra demand post recession!
The worst thing your business can do post recession is not to be able to deliver against the expected demand. A customer will very rarely go back to a provider that has failed them before! Yes, this will probably give you greater cost during the recession compared to your competitors but you will be able to capitalise much more post recession.
Yes, maintaining this capability will probably cost you more during the recessionary period, however, it does offer you the opportunity to review your systems and processes to see if you can maintain capability at reduced costs (using the web more, automated processes etc.).
Step 4: call to action – the recession has come to an end, growth has started, people are starting to re-enter the market – you need to be top of the pile! This not only means you need good marketing communications and a strong customer proposition, but you also need a strong call to action to get those customers spending again! Give them that irresistible offer to get them started.
Consider time limited discounts, added extras, packaged bundles. Anything almost! You need to get those customers doing business with you, before they do business with anyone else.
A point to remember here, whilst the recession will have caused deep financial hardship and woe to many, the majority of consumers (not necessarily businesses) will have a lot of disposable income at hand due to falling interest rates over the recessionary period. This is not going to last for long! Post recession, interest rates are likely to rise in order to control the expected inflationary pressures, and this will have the effect of reducing disposable income within the economy.
