When the economy is good, companies focus on sales. When it slows down, the focus shifts.
Businesses behave in one of three ways.
The Ostrich – Preserve status quo and hope for the best
The Headless Chicken – Blindly slash costs across the board
The Fox – Make business more effective so they can be in a stronger position when growth returns.
Most businesses panic fearing that; Clients will cut back or stop spending and sacrifice quality and buy low cost products. This is true, but only to a point.
Don’t forget. When unemployment is 10%, 90% of people are still employed. With the government financial incentives, the fall in interest rates and oil prices, people have a lot more money, not less.
A recession is not a problem, it is a tremendous opportunity to build your business as competitors cut back. You can gain clients, gain loyalty and boost market share.
Before I discuss how to build your business in a recession, let me tell you the 6 Keys to guarantee failure in a Recession;
- Don’t make any changes
- Don’t do enough
- Stop marketing
- Don’t vigorously pursue referrals
- Don’t create a “wow” experience
- Don’t take immediate decisive action
You can thrive in a bad economy but most businesses make mistakes when deciding what to do.
The recession highlights weaknesses in businesses which haven’t employed the right strategy and the right marketing in good times. If you have;
- built a great customer database
- have the right technology in place
- have focused on customer service
- have built equity through differentiation in the good times
you will breeze through this recession with substantial gains in market share.
There is business out there. A client of mine is a printer and had no work. A couple of weeks ago he cold call door knocked from Monday to Friday 8am until 8pm and got 28 jobs. If he had sat in his print shop and waited for the phone to ring, he would have got none!
Let’s look at the steps to take in business and marketing your business in tough times separately.
There is no such thing as a quick fix. But whether you are the CEO or a marketer there are several things you must do:
- Be brutally honest … face reality – what are your strengths and weaknesses?
- Be decisive, flexible and dynamic
- Be entrepreneurial all the time
- Have the right business model and strategy
- Show leadership, focus on priorities
- Manage costs
- Focus on profitability
- Use technology to attract and benefit customers, streamline processes, improve efficiency and reduce costs.
Most of all, don’t sit around complaining. Tackle it head on. Rethink, restructure and strengthen your business. New ideas don’t need to be expensive, just creative.
Let’s look at the keys to running a business in a recession first. Management needs to:
1. Focus on Making Money. Cut down on waste, but focus on generating revenue. You need to bring in more customers. Use your existing customers to attract new customers.
2. Cut Costs Cleverly. Analyse your costs, drive them down. Don’t cut across the board. Have meetings with your team, have them propose efficiencies. Only cut costs that don’t affect customers in any way.
3. Monitor Your Cash Flow
- Maintain rolling projections of balances, don’t get caught
- Strengthen your collections
- Maybe introduce prompt payment discounts
- Stretch creditors
- Real time monitoring of all KPIs, rather than trailing indicators
4. Clearly Differentiate from Competitors
5. Maximise Your Website Effectiveness. For example, work closely with Search Engines.
Enhance product range, give information, easy to navigate and process orders, answer questions
6. Measure Performance. You need to track the success of all initiatives, whether stock, employee performance, customer deliveries or marketing. With today’s technology, every aspect of a business’s performance can be measured.
7. Take Advantage of Innovation and Technology. Keep developing innovation and technology for the future. It will increase opportunity and reduce costs and set you up for the good times that will come. I discuss some of the technology opportunities a bit later.
8. Do You Have the Right People? There is an old saying “It is easier to change people than it is to change people”. Anyone not being positive, innovative, committed and underperforming must go. At the same time, the CEO must be more visible, encourage and cement employee relations and loyalty. In recession, employees are nervous about their job, this affects performance. Give encouragement, increase productivity.
9. Understand Your Product Costs and Profit Margins. Ensure you know precisely what your profit margins are on each product. Focus on selling higher margin products. Carefully monitor your inventory of product, minimise slow sellers.
10. Create New Market Segments. Reposition or repackage products to attract a new market segment.
11. Improve Your Skills. Get a business coach. Be the best you can be. Tiger Woods has a coach. Raphael Nadal has a coach.
12. Support Partners, Distributors. Allowances may encourage distributors to stock product.
13. Solicit New JVs/Distribution Channels
Create relationships with complementary, non-competing businesses. Maybe you can join them in presenting seminars. Perhaps link with non-competing but allied web sites.
14. Take Advantage of Your Size. Small businesses are flexible, responsive and adaptive. Ensure you keep on your toes, chase new markets, watch the news stories. You can adapt, big companies can’t.
15. Become the Knowledge Expert. Get free exposure in newspapers, local radio, seminars and online. Build reputation and credibility. This is a safe haven for customers in a recession.
Secondly, how do you market your business in a recession:
1. Be positive, enthusiastic. Enthusiasm is contagious. Motivate both your people and clients
2. Don’t stop marketing. Most businesses cut the budgets and the time spent on marketing. This is the perfect time for marketers. Media outlets are struggling, all selling off the bottom of the rate card. Fantastic deals to be had. If necessary, use :15 secs not :30 secs; use radio, not TV.
- You cannot grow without getting your message out.
- When things are tough, spend more time on marketing.
- You need to have an ongoing, consistent marketing policy.
- Remember to use low cost marketing – flyers, direct response, newsletters, seminars, educational sessions.
- Don’t do brand marketing.
- Look for new ways to communicate your message. Look at new media … direct … inexpensive … highly effective.
- Cross promote with suitable partners.
In tough times, trusted brands, including yours, are more trusted.
3. Research and Prioritise Your Customers. Invest in knowing all you can about your customers. Differentiate yourself to hit the customer’s hot buttons. You should have a database of every person who has ever bought from you. If you don’t, you deserve to fail. It is expensive to get a new customer, very inexpensive to retain. How can you retain them if you don’t know who they are or where to get in touch with them? Prioritise your customers. Focus on the 20% that generate 80% of your revenue.
4. The Customer is King. The customer is the only person that counts. In a recession they are also looking for value and ways to cut costs. Value does not just mean price; ease of purchase, reliability, service, delivery, quality. Look at different value combinations, repackaging. Always be the customer’s friend, be warm, empathetic and interested.
5. Give Superior Service. Loyal customers are gold at any time but in a downturn they will maintain and give you the foundation to build your business. Create the WOW factor, provide great service, add value, provide useful advice, keep in touch, provide faster delivery, education, information. This produces advocates, generating word of mouth – the key to successful business.
6. Provide Value. We discussed earlier the benefits of great service and added value. Apart from being the most effective way to grow the business, in tough times there are more complaints and returns which are costly to business.
7. Seek Additional Revenue Sources. Leverage your current customers …chase referrals.
Segment customers … commence predictive selling. Adding value can increase revenue and margin. Explore new channels and approaches. Consult with customers.
8. Increase Your Online Business. Online creates new opportunities, new, often unexpected customers. In Q4 ’08, while business sales were crashing, online sales increased 6%.
Don’t think of the website just in terms of current products and services. It is a chance to greatly extend your range and sales potential.
The internet gets 1.5 billion unique searches a day, they are people looking to BUY. You can sell and source with much less risk. You can sell thousands of items online without carrying stock.
The traditional way to build a business is:
i) Strengthen your core business
ii) Extend the brand with more products and services
iii) Leverage into new markets with current offering
iv) Introduce new products into new markets.
Building traditional business is risky, particularly in a recession. The challenges are: organisational,
brand relevance, market insight and understanding. The internet doesn’t pose these risks AND you can have a good website up very inexpensively in three days.
9. Innovate. Use the recession to study competitors, study trends, increase efficiency.
10. Reactivate Dormant Accounts. Sit down with these customers, or call them and talk to them. Don’t hard sell, let them know you miss them. Don’t seem needy. Follow up with a letter, a special offer if you know them well, maybe include testimonials. Remind them of your products, service, availability. You are there for them. On average, 1 in 10 will buy.
11. Reactivate Old Leads. Many of those leads you gave up on represent business. Studies show 80% of sales are made on the 5th – 7th contact. Over 75% of sales people call only 3 times. Again, call them or meet with them and chat. On average 1 in 10 will buy.
12. Keep Prices Realistic. When times are tough, your competitors also review their prices. Phantom shop, check competitors’ websites, understand what they are doing. The solution is to be competitive. But don’t forget, customer service leaders can charge more and retain the business.
So you don’t have to be cheaper, just competitive. REMEMBER: Great service and happy customers are the hedges against losing customers and maintaining prices in a recession. DON’T slash prices, very difficult to get them back up. Add value instead. It shows you care.
13. Use Risk Reversal
It is important to increase efficiency and productivity using technology. Technology provides:
- Automation of a company’s management, accounts, stock control, wages, regulatory reporting, resulting in very substantial savings.
- Immediate measureable marketing results
- Increased response
- Marketing metrics
- Enhanced customer mining opportunities
- Dialog not monolog opportunities
- Dramatically lower costs
A few examples of the effectiveness and efficiency of new technology.:
Variable Data Technology; September 2005 – Fixed line carrier received a 36.1% response rate from a print direct mail using Variable Data printing to 340,000 customers, against a traditional direct mail response rate for a similar program of 1.7.
SMS/Radio Commercial; Tying SMS response into radio ads and station loyalty clubs, advertisers are data mining and interacting one on one to buy a pizza, attend an event or drive radio audience.
On-line viral promotion; Unilever s promotion for AXE mens toiletry range cost $20,000 and was sent to 30,000 email addresses, in 6 months generated 50 million visits of 9 minutes duration and huge retail sales.
Segmentation and Predictive Software; Northern Tools compares the purchases of their clients e.g. people who buy a hammer also buy a Phillips Head screwdriver. They detail the top 3,000 previously sold products and the top 7 related products that sold best with them. They then promote the other 7 products to the customer who had bought any of the 8 products. They constantly analyse the data and constantly refine it.
By making these purchase predictions they generated more than $3mln from just one campaign. So how specific can targeting get? The Democratic Party in the US has defined the community into 2,700 different categories and crafts individual messages for each.
As product offerings become more similar and response times to market change become shorter, marketers need to look at new media. New media dramatically outperforms traditional media with
Customer acquisition, Buyer behaviour and decision making, Customer loyalty and retention, Providing information, Obtaining instant, measurable results
This represents a paradigm shift in marketing.
The performance of the various media over the last few years highlights this shift:
People purchasing on line 2008 875 million
Mobile phones 24/7 2008 2.9 billion
Global retail sales 2007 – 2008 Down 3.6%
Online purchases 2008 Up 19%
Mobile advertising 2008 Up 40%
Traditional advertising 2008 Down 16%
Does anyone think retail sales will increase 40% next year? Where the future lies is obvious.
An interesting view of database marketing from Nielsen Global Online shows 40% of online shoppers buy from a particular site because of a friend’s recommendation. Further, if you had a database of 10,000 customers, in 2 years you would have 100 new customers EVERY WEEK that had never been into your store.
So, how do you build a database? A major Swedish Ferry company had 12m passengers per annum but had kept no data. By running 4 separate competition sites on the ships plus collecting data on booking, then reconciling the entry forms, in 12 months had a 3.3 million database. Now they can be segmented and marketed to. The result, a sales increase of 30% over 2 years.
New media is ideal for not only attracting but retaining customers at very low cost which is both controllable and measureable. The ways to do this are by:
- Search engine optimisation
- Pay per click
- Email marketing
- Online community
- Hand held devices
Let’s look at these one at a time.
Search Engine Optimisation
- Over 85% of people use search engines
- 82% don’t look past first page
- First item listed on Google gets 50% of all clicks
- All 12 items on page 2 of Google get 1%
Superbreak Hotels in the UK had low website traffic, used SEO, revenues increased GBP 154 million.
Pay Per Click
This is where advertisers on a search engine, advertising network, blog etc. only pay for the advertising when someone clicks on the advertisement to visit the advertiser’s site. Potential customers who click are more likely to buy. The cost per click ranges from 1 cent to $15.00.
This is direct mail to your own or purchased database.
Your online community, blogs, podcasts or forums can be used for education, information or sales.
Hand Held Devices
The fastest growing means of communication today is hand held devices such as iPhones, iPods, PDAs etc. These can be used to send personally tailored video or message pitches to drive immediate sales. Used very effectively by Coke, Kelloggs, and others.
Benefits of this New Media
- Most are 24/7
- Reach people personally in own time
- Low cost
- Spend is controllable
- Measurable – see what is working
- Sell to them, not waiting
- Generate immediate sales
- Message is instantly changeable
These communication media are the most effective marketing tools today. To be competitive, to not only survive the recession but be competitive in the future you must embrace them.
It is an excellent opportunity for creative marketing so it is important to be able to think outside the traditional box. You also require Vision, Passion and Commitment. Without this you will not be able to compete in this new environment.
We are in the knowledge age … when the person with the most knowledge always wins. Why it is important to keep learning. Continue to be creative, innovative and outwork your competitors.
It’s not about how hard you work. It’s about how much knowledge you have. And the power of your ideas. You have to be flexible, be creative and smart because today good is not good enough.
The reality is that it is tough out there and your competitors are also getting better at what they do.
You all need to set daily goals, be really excited to come to work in the morning and be surrounded by vibrant people with great ideas?
We are the primary contributors to our own success. You need to take on board everything you have heard today, determine if any of it would improve your business, analyse your performance and make changes,…and do it now. You can’t improve by doing what everyone else does.
Ten years ago we talked about “internet years”, where technical advances each year were more than in the previous 7 years. Now we talk about “digital years”, 2-3 times faster than “internet years”. That means change today is happening 20 times faster than it did just 10 years ago.
In my opening comments I said that I believe this is not just a credit crunch but it is also a technology revolution. This is causing a double effect. To beat this recession and survive beyond it, you need to do business differently. To be able to prosper when the recession’s over will take a very different business than most people run today.
Dramatic changes now will not only get you through the recession but will stand you in good stead for the future. It is telling that it is the legacy companies that are the most affected by this recession.
So keep learning, change the way you do business. Most of all, be enthusiastic.