Riding the Recession – How to Come Out on Top (a multi-part series)
Recession hits your business. Now what?
Since it’s the topic on everyone’s mind right now, I’d like to spend a little time debunking rumors, stating truths, and, true to the mission of this blog, helping businesses grow efficiently, even in tough times.
Picture this scenario (it might be easy because it might be happening to you right now) – you’re running a business during an economic recession (or even depression). Sales slows, so you are forced to make some budget cuts. You’d rather not fire employees if you don’t have to, but a few of the new guys get a pink slip, bonuses disappear, the new arm of the business, currently netting a loss gets put on hold indefinitely, and, since customers aren’t coming in anyway, you cut marketing by 25%.
If you’re truly short on capital, the first 3 cuts make sense during hard times when cash flow is tight. On the flip side, reducing your marketing exposure (not necessarily dollars) can start a deadly downward spiral. As you reduce your exposure, less and less customers are drawn in to your business, which further slows sales, resulting in even more cuts. As you can see, this is a bad pattern to start.
Reducing your product/company exposure during tough times is bad.
Let’s take a look at what happened during the Great Depression for a little historical background (like the famous quote “Look at the past to see the future, ” I don’t know who said it, but it’s too good to be my original thought). It doesn’t matter if you think what’s happening now is a mild recession or the start of a deep, lengthy depression. We can apply this case study to today, no matter what it turns out to be.
The Great Depression was a huge shake up in the corporate world. By removing the status quo benefit from the reigning giants, more efficient, smarter companies were able to seize the opportunity and jump ahead in the market. For example, you might recognize a few of these companies that started during an economic downturn: GE, Disney, HP, and Microsoft. Disney was started 5 years before the Great Depression, and HP opened its doors in the midst of the Depression.
The best example of a well-executed depression strategy is Chevrolet. Market-leader Ford had been outselling them by a factor of 10. As tough times hit Ford, who reduced their marketing to stay afloat, Chevrolet capitalized on the opportunity by ramping up its marketing, and took over as the market leader in 1931.
In the same way, Kellogg overtook Post in the breakfast market simply by providing a better deal and advertising it. By the time the depression came to an end, more consumers were eating Kellogg’s brand, and their loyalty remained.
Proctor & Gamble is another excellent example of a depression-thriver. It never cuts spending during a downturn, and always comes out stronger than before.
The key to surviving and thriving, in an economic depression is to act like it’s not happening.
This doesn’t mean everything is business as usual, but your customer needs to see that you aren’t afraid. While your competitors are slashing their advertising exposure to save money, you simply refocus your advertising to discounting prices and saying you’re the best value. Your target audience will value your apparent staying power, do business with you, and remain loyal in better times.
Stay tuned for my next article, with specific marketing ideas to cost-effectively grow your business during this recession.
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Tony Kau is co-founder of Portland web design and Internet marketing company Vanivo. For service inquiries, you can contact him directly at tony -at- vanivo.com.
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