Growing against the odds
Yes, a recession is coming. They always do, we just don’t know when or why. While two consecutive quarters of negative economic growth doesn’t sound like much, after the ‘Great Recession,’ many business owners are skittish. Couple this with headlines about tariffs, impeachment, trade wars, inverted yield curves, oil shortages, regional strife, and plummeting consumer confidence – some business owners are downright worried.
As with any crisis, planning is critical. While a recession might not be imminent, it’s probably wise to have a playbook (you know…in case of emergency – break glass) at the ready.
It’s important to note; not every business suffers during a recession. Some thrive and are poised to roar once the economy improves (which it always does).
Studies from Harvard,Bain Capital, and McKinsey all recognized the actions that made the difference between the winners and losers and the steps the winners took to roar out of a recession. Because we’re not experts at operational efficiency, supply chains, inventory management, or improving your balance sheet – we’d like to share the winning formula for marketing during a recession.
Don’t Stop Now
Just because consumers aren’t buying as much during a recession, doesn’t mean they’re not going to buy later. Although marketing is a variable expense, it doesn’t operate like a faucet. Turn on: grow business. Turn off: lose business. A company continually builds up equity in their brand over time and establishes a ‘share of voice’ in the marketplace (relative to competitors).
While there is some inertia in marketing, it does have a shelf life. Without continued investment, a company’s share of voice will erode (followed quickly by share of market). Although not every business will be in a cash position to increase their share of voice, it’s imperative that they don’t lose any. Sure, companies that cut their marketing budget might get short-term cashflow relief, but research shows they will see income fall 20-30% over the following two years as a result. Once they stop the marketing machine, it can literally take years to recover.
An Opportunity to Grow (at a bargain)
While the bottom line might be difficult to grow during a recession, there is no better time to increase market share. Business books are full of studies about companies that took advantage of a recession to inexpensively grow their business in a downturn.
A classic example is Wrigley gum. During the 1907 recession, Wrigley borrowed $250,000 to purchase discounted advertising space that would have typically cost $1,500,000. He timed the advertising to support a new dealer promotion and quickly grew from a regional to a national company with increasing market share. When the economy improved, Wrigley thrived and established itself as the preeminent market leader.
Growing share during a booming economy is difficult (everyone is spending). Gaining market share during a recession requires capital, but the eventual ROI can’t be beat.