The natural instincts of most businesses, is to pull in their horns when recession looms. Just as consumers are abandoning the high street and reveling in frugality, so many businesses look inwards, cut budgets and cut back customer service.
This is a big mistake.
Great companies always outperform their competitors during hard times. They seize the opportunity to grab market share by continuing to invest in their customers, their products and services and keep a long-term focus.
Whilst many companies go to the wall during recessions, history is rich with examples of those that built unassailable gains and rode to greatness in these periods. Some of the world’s most significant inventions and most successful corporations were born during depressions or recessions. New needs emerge in such times: Health insurance was born out of the US Depression as were stereo recordings, digital computers, Monopoly, sunglasses, ballpoint pens and bubble gum, to name but a few. Messrs Hewlett and Packard got their products rolling from the famous garage in 1939. Despite industry in crisis and companies going under, Fortune magazine, the world’s first and most successful business publication was born at the height of the Great Depression : this was a counter-intuitive and risky venture at the time, but proved an unqualified success.
Continue to invest – your money goes further
During recessions, when everyone else is cutting back on marketing expenditure and research and development efforts, the wisest companies continue to invest in these. They are often able to do so because they managed their businesses prudently during easier times, keeping costs under control and building a valuable war chest. This makes sense, as during a recession money goes further, as suppliers cut costs, and are ready to make deals. For those with available resources, this can be a great time to get acquisitive. Sadly most firms work the other way round, spending freely in good times and then savagely cutting costs when times get tough.
Lavish time and effort on customers
For those companies or small businesses that haven’t built up a war chest, there are still great opportunities. What they lack in funds they can make up in time and effort, by lavishing attention on customers. This means spending time to listen to them and find out how to serve them better; to get them to collaborate with you in dreaming up new products or solutions; to look for ways to offer them more value, rather than lower prices and to find ways to lock in their loyalty.
Keep on marketing
Advertising and marketing is often the first spending victim of recessionary cost-cutting. It is such an easy budget to slash, but you do so at your peril. Look for ways to use the money more efficiently, to seek out better deals and to try new approaches, but NEVER stop communicating with your target market. If your competitors cut back their spending, rub your hands with glee and see it as a golden opportunity to gain share at their expense. In a normal market, marketing is often a game of ‘tit for tat’ that makes it hard to gain ground and often results in standoff. In recessionary times, you can find yourself on an empty dance floor with the audience’s eyes trained on you alone. Go for it!
Ideas and insights are free!
Whilst money may be tight, creativity comes free, as does spending time understanding your customers’ needs. Time spent now hanging out with customers and consumers, observing them, talking with them and listening to them will yield rich insights about their needs and behaviour that will give a huge edge to your new product and service development efforts and help you hone your advertising messages.
History shows that it is twice as easy to grow share in a recession as in buoyant economic periods. Those firms that succeed in growing market share in this recession are likely to hang on to it, while those that lose it will have a tough and very costly battle to regain ground when things pick up.
Yesterday I read a quote from Marco Pierre White of Hell’s Kitchen:
“I think a recession is the most obvious time to open a restaurant. Number one: in doom and gloom, you’re creating something that’s exciting and fun. Number two: everything is cheap to do. Number three: you get the lion’s share of publicity ‘cos no one else is doing it. So it’s entirely logical to open a restaurant during a recession.”
There are many other businesses that could apply the same philosophy.