Marketing strategy in a tough economy

Feeling the crunch? As the sharp decline in economic growth hits most of the developed world and government bailouts attempt to ease tension, the smart and the entrepreneurial are sitting quietly, about to make their next move.

The slowing global economy can actually present many opportunities if you know how to spot them, but winning in this climate depends on how well you strategise and play the game.

As the economy slows, first reactions are commonly based on fear and emotion, driving changes in the key areas of:

1. Consumer behaviour

The world doesn’t stop so nor does consumer spending. However, decreasing consumer confidence means consumers will be more cautious, gearing towards lower value items and cheaper alternatives or delaying high ticket purchases.

2. Business behaviour

Initial responses are to preserve or downsize rather than grow. Reductions in budgets and activity are commonplace. As a result, business development, innovation and marketing are minimized and many businesses will try to source cheaper inputs.

Next, businesses are likely to want to get rid of excess or slow moving stock via heavy discounting and “just-in-time” processes will become more pertinent.

3. Market forces

As property prices, currencies, commodities and stocks, begin to tumble, just trying to keep abreast of what’s going on will further perpetuate caution and confusion. Thus, it’s important to pre-empt the actions of your stakeholders including supply chain members, investors and competitors.

The silver lining in an economic downturn

As competitors scale back their activities, there has been no better time for your business to achieve marketing success. However, you need to act with logic (not emotion), using a clear strategy and be ready to pounce quickly on opportunities as they arise.

This sentiment is echoed in a recent UK study by the Small Enterprise Research team at the Open University. Small business owners responded to questions about the slowing economy and most believed that “increase(ing) marketing spend” was a sound investment to drum up business to get through tougher times.

Furthermore, when times get tough, people get creative. Another silver lining is the possibility of new innovations resulting from a necessity to be smarter. Take for instance the dotcom crash of the late 90’s and early 2000. One of the many lessons learned from this disaster was how to reduce the cost of acquiring new customers and hence today we have Web 2.0 technologies.

Playing to win

1. Re-align your offering and business strategy with the changes in consumer behaviour and needs. An easy example would be with fuel efficient cars – if the pitch was environmental friendliness, it now switches to savings on fuel costs.
2. As competitors consolidate activities, they may leave some customers stranded. Marketing to such potential customers enables you to seize market share.
3. In such uncertain times, it’s important that your business is seen as reliable and stable. For example, with the impact of the economic downturn in the US in early 2000 and the 9/11 attacks, the food industry suffered a harsh blow. According to Tera Johnson from Chrysalis, those companies with weaker brands could not sustain profits whilst the stronger players were able to increase their pricing.
4. How you spend your budget should focus heavily on maximizing return on investment. Thus, there’s likely to be a greater shift towards online marketing initiatives. Online marketing offers many benefits over traditional marketing including greater reach, only paying for targets you do reach (ie. pay per click advertising) and easily tracking results through Google Analytics.
5. The tough times ahead will create difficulty getting new sales, so keeping your cash cow customers should be a key marketing strategy. Protect your own backyard by keeping your high value customers loyal. You should start by isolating which 20% of your customers bring in 80% of your income. Then look at how you may get repeat business from the 20%.
6. Simultaneously, you may wish to aim for the low hanging fruit by adopting the strategy of more sales at lower per unit value.
7. When aiming for the quick and easy sale, there’s no need to immediately start discounting. This frantic act only serves to create price wars, diminish your brand (which you’ve probably spent many years and dollars to develop) and will set a false market expectation. A better approach would be to source and offer a cheaper alternative. This also enables you to capture market share at multiple points (ie. high, middle and low prices).

The old school reactions of downsizing activities in a slowing economy may not always be the best move. With our current knowledge and technology, experts recommend increasing your marketing with new strategies to fit the climate. Remember, marketing is an investment for future business and sales growth – you only get if you put in.