This is the second in Roberto's series of marketing blogposts. We can all benefit from his expertise in these challenging times. Read on for analysis on his recommendations.
In my last blog post I looked at the empirical evidence and analysis in seven academic papers and concluded that companies benefit by continuing/increasing marketing during recessions. My blog post finished by making the following 6 recommendations:
- Don’t give in to the reflex to act immediately when reacting to an economic downturn;
- Analyse the impact on your clients and their behaviour;
- Put measures in place to retain existing clients;
- Analyse your products and their appeal to different types of client in this new world;
- Analyse your distribution and promotional channels; and
- Invest in products that will do well in the new environment but revise your marketing mix to suit the new world.
In this blog post we’ll look at these recommendations in more detail.
Don’t give in to the reflex to act immediately
The more sudden the economic shock the more likely managers are to give in to a gut reaction to cut costs indiscriminately. Try not to. You may end up doing more harm than good – and you most probably have more time than you think.
Take the time to gather the information and conduct the analysis described in steps 2-5 below. It doesn’t need to take long.
Instead of thinking “I need to cut costs by X%” you should think “this is a new environment, a new world. What can we do to succeed in it?” The answer to that question is likely to be a mixture of cutting, developing and increasing focus in some areas.
Analyse the impact on your clients
How has their world changed? What new needs do they have? The most important thing you can do is talk to your customers, understand their situation and their new needs. If they need less of what you currently sell them, is there anything they need more of? How can you help them?
Some of your customers may be scrambling to cut all costs but are there any that are not? Are there any that view this as an opportunity and are seeking to expand some of their operation? Can you help them? Are any of those buying products and services from other suppliers when they could be buying from you?
A solid understanding of your customers’ needs and their new situation is the most powerful filter through which to make all your other decisions. And, at times like this, customers will appreciate suppliers who try to be helpful and to understand their requirements. If you do this well, this period could well deepen your long-term client relationships.
Put measures in place to retain existing clients
Remember that it is much easier and cheaper to keep the customers you already have than to find new ones. At times like this, customer retention initiatives become more valuable than ever.
Implement campaigns which stimulate repeat purchases, up-sell or cross-sell your product and service range. But prioritise helping over selling.
Analyse your products and their appeal to different clients in this new world
If your products are cheaper, or more cost-effective than the competition does this downturn represent an opportunity for you? Customers often downgrade products during a recession. They stop buying the Taste The Difference range and switch to value brands. If your products fall into this category, marketing now is more important than ever.
If, on the other hand, your brand is built on luxury and exclusivity be very careful about chasing business just on price. You may damage your brand and end up competing with firms that are much more used to competing on price.
Maybe you could launch a new range, or a new brand – but think carefully first.
If your products are highly priced, what can you do to your pricing to make them more appealing in the new circumstances? Can you unbundle certain elements to reduce costs? Can you launch lower-price, lower-service versions of your products? Or introductory offers?
If you sell an economic product in a market with high switching costs (where a lot of time or effort is required from the customer before they can switch to you) an economic downturn can be a huge opportunity. All of a sudden savings that were not worth chasing become more important to your clients. Again, marketing will help you put the benefits of your product across to your potential customers.
Think long-term when pricing products like this, for example, rewarding long-term contracts with lower up-front costs.
If you sell a range of complementary products, is there one that tends to be your clients’ entry point? If so, focus more of your marketing on that product and change your pricing to make it more economic to enter your eco-system, e.g., wave set-up charges in return for a longer-term contracts.
If you determine that none of your products are likely to do well in this environment, change your perspective. Think of your company as a collection of assets, skills and capabilities. Can you mix these up in different ways to come up with new products and services that will be useful to customers in this new world?
Earlier today, I came across a fantastic example of two firms thinking along these lines and teaming up to provide a new source of revenues for both:
“Patty & Bun produces lock-down kit: Patty & Bun, the better burger concept led by Joe Grossman, has joined forces with its meat supplier, butcher HG Walter, to produce “The Lockdown DIY Patty Kit”. The initiative has sold 3,000 kits in just ten days, with both businesses adapting their websites and using existing drivers and vans to facilitate the deliveries.”
Analyse your distribution and promotional channels
Even if they have not been disrupted, there might be better ways of doing things because relative costs will have changed.
Advertising and recruitment are just two potential components of your marketing mix whose costs tend to fall during recessions. Maybe you can afford to do things now that you couldn’t consider before.
Are there companies selling complementary products who could help you to sell yours, as in the Patty & Bun example?
Invest in marketing products that will do well in the new environment
Having done the analysis above, you should focus your marketing activities towards those products you’ve determined have a better chance of succeeding, aiming at customers who are still buying.
“Marketing” includes a wide range of tools with different time horizons. Focus your spend on those that are more likely to produce short-term results.
Now, more than ever, it is important for potential customers who land in your marketing funnel to be effectively followed up. Walk meticulously through your sales and marketing process and make sure that leads are not leaking from or being abandoned in your funnel. Make sure your Sales and Marketing teams are working well together, that it’s easy for your customer to buy and that the process makes sense from their point of view.
I am amazed at the number of times I look at a website where I land on dead pages, or where it is extremely difficult to place an order, or where I leave a message never to hear back from anyone.
To summarise, don’t give in to your reflex to cut costs indiscriminately. Think about your clients, your products and your strengths and weaknesses. Analyse the new environment and act accordingly.
Remember that “companies that…take a scalpel rather than a cleaver to the marketing budget, and nimbly adjust strategies, tactics and product offerings in response to shifting demand are more likely than others to flourish both during and after a recession”