We are living in unprecedented times. Not since the 1918 Spanish Flu pandemic have we seen such an impact on people, society, and our economic way of life. Even in the three previous recessions, we have not experienced the impact Coronavirus is having on our daily personal and business lives.
As history has shown us, regardless of recessions or extreme events that impacted the economy, we will eventually get through it and thrive once again. History has also shown us that businesses tend to be reactionary with responses like cutting budgets and employees, as we have seen during this pandemic. Cash is king and when there are unknown business implications, preserving cash is understandably of extreme importance.
However, there needs to be a balanced approach to operations and investments – marketing, innovation, and M&A.
Marketing, unfortunately, is often the first to be cut. Marketing is, in my opinion, the strategic engine for any business as it impacts every department within your company. It provides opportunities for sales, differentiates your brand in the marketplace, and helps to fend off competition. Without it, I believe a business leaves itself vulnerable.
Take a Breath - Don't Make Rash Decisions
Make the best business decisions and avoid business disasters. It sounds simple.
However, business leaders tend to, probably more often than they should go with their gut or intuition based on previous experiences. In doing so, there are many cognitive biases that can impact these decisions.
Dr. Gleb Tsipursky, Disaster Avoidance Expert, and a guest on my podcast, Business Growth Café, writes that there are over 100 cognitive biases that can impact decision making. In his latest book, Never Go with Your Gut, he addresses 30 of them. While the pandemic did not exist when he wrote the book, its contents are even more relevant today as business leaders are trying to navigate these troubling times.
One way to mitigate the risk of bias is to talk with your customers and your prospects. If you have listened to my podcast or read my previous blogs, you know this is a mantra of mine. Know your customer. There is only one way to truly know them, and that is to talk with them.
Ask the right questions to better understand the impact this pandemic is having on them personally and professionally. Show you care as a leader and express how important they are to you, not just as revenue on your P&L, is essential (in non-crisis times, too). The learning and insights you derive can be used to help in your sales and marketing messages to help you stay relevant.
So, don't guess–quit talking to yourselves in the boardroom or bedroom to come up with the definitive solution–talk with your customers. Don't let biases like "group think" where people tend to go along with the leader in the room (or Zoom meeting), lead you down the wrong path.
Understanding the behaviors and motivations of your customers are essential when developing marketing strategies. Ensuring you know them is essential when appealing to them, especially during this crisis. When speaking directly with your customers, you can dig into more of their psychographics: their behaviors, motivations, concerns, needs, and wants to help focus your efforts.
Seek Operational and Marketing Balance
Based on studies that examined previous recessions and the impact they had on business, they found that selectively reducing costs by focusing more on operational efficiencies, and even investment in marketing, R&D, and new assets helped them achieve more growth than their competitors in post-recessionary times.
A March 2010 article in Harvard Business Review, "Roaring out of Recession," confirms that cutting costs deeper and faster didn't cause flourishing after the recession. Those that succeeded implemented a delicate balance of cost-cutting to survive, but also invested in planned growth for tomorrow, and did well after a recession.
The study conducted by HBR and the basis for the article was a yearlong project analyzing strategy and corporate performance during the past three global recessions, which included the 1980 crisis (which lasted from 1980 to 1982), the 1990 slowdown (1990 to 1991), and the 2000 bust (2000 to 2002). 4,700 public companies were included in the study. The study grouped the data into three periods: the three years before a recession, the three years after, and the recession years themselves.
According to the study, those that cut costs quickly had the lowest probability (21%) of pulling ahead of the competition when times get better. Those that invested heavily only had a 26% chance of becoming a leader after the downturn.
However, those that deployed a combination of defensive and offensive strategies in a more balanced approach resulted in the highest probability (37%) of breaking away from the pack in post-recessionary times.
As quoted in the September 5, 2019, Forbes article, "When A Recession Comes, Don't Stop Advertising." When marketers cut back on their advertising spending, the brand loses "share of mind" with its customers and, in turn, can potentially lose future sales. An increase in "share of voice" can lead to an increase in share of the market, which can lead to increased profits.
Finding an operational balance is key!
Stay Flexible
Lastly, stay flexible and adjust your strategies and tactics on the assumption of a prolonged difficult downturn, yet be able to respond quickly when the upturn comes.
One possible way is to think of or play out "What if Scenarios" or "Scenarios Planning."
The decisions businesses make in the near-term will most likely impact how they sustain their business in the long run. Now is the time for leaders to be decisive and implement well-thought-out actions to minimize the economic impact yet to come, and at the same time, prepare for what changes may lie in the months ahead.
The bottom line: don't wait until the economy is in full recovery to ramp up or even act. Seek a balance between operations to preserve cash and investing in your company’s future.
I love this quote by C. S. Lewis, and I believe it is a rallying cry that business leaders should embrace:
You can't go back and change the beginning, but you can start where you are and change the ending!
Angelo Ponzi is a Fractional Chief Marketing Officer and Brand Strategist. He has over 25+ years of business experience in sales, marketing, branding, strategic planning, and market research. His senior-level expertise includes developing and directing comprehensive market/product plans, branding and communications plans, and strategic business planning for a variety of business-to-business, financial, consumer, medical, package goods, general retail, restaurants, and high-tech clients. He has led both small and large teams at global, national, regional, and startup companies, as well as worked with products in all stages of their lifecycle, from inception to implementation. Previous positions have been on both the client and advertising agency sides of the business giving him a unique understanding of his client’s business operations, sales, marketing, and communications needs. Learn more at theponzigroup.com. He also the host of the radio show/podcast, Business Growth Cafe.