Unpredictable. Slow. Bleak. Grim. Gloomy. All words that have been used to describe the economic outlook for the balance of 2017.
Let’s face it, things don’t look too rosy and I’m guessing we’re going to have to tighten those belt buckles for a good time coming.
Whenever a recession or any kind of economic downturn hits, consumers and companies alike become more cautious with their money. Customers aren’t buying as much, which means that businesses have to cut costs to stay afloat. And since the customers aren’t buying, the thinking goes, why not cut advertising expenses?
What’s interesting is that research has shown that cutting ad spending during a recession hasn’t been shown to make companies any more profitable.
In fact, according to another study, reductions in ad spending may have actively hurt companies in the past.
Here are five ways to keep moving forward when times get a little tough.
1Be smart and thrifty, but don’t panic — This, too, shall pass
Economies all go through cycles of expansion and contraction. We love the expansion, but the downturns can be painful. If you’re smart, you’ve managed your balance sheet well and can ride out a period of slow or no growth. If not, you may have to make some cuts. Just be careful to trim fat and avoid cutting muscle as much as possible.
2Marketing is muscle, not fat – Be careful about cutting it
Just as the smartest investors view down markets as a time to buy when everybody else is selling, the savviest marketers know recessions are great times to pick up market share.
They understand that by maintaining their budgets (or even increasing them) they may not come out ahead during the down times, but they can pick up market share that will pay off in the long run.
Cutting your marketing spend is a sure way to give ground to competitors who may be more aggressive during the downturn.
3Don’t lose focus by chasing business you wouldn’t normally want
When clients and customers get nervous about the economy, they cut back their spending.
For you that could mean fewer transactions, smaller purchases, or possibly both. But if you try to broaden your core product or service appeal to please a wider audience, chances are you’ll make your best customers even less satisfied, giving them one more reason to stay home or spend less.
There’s a reason you don’t pursue certain types of customers when times are good, and that reason probably hasn’t changed. Do your best to stick to your niche and enhance the value you provide to your current customers. They may decide to make their cutbacks in areas other than yours.
It’s easy to think about discounting and running ‘specials’ during a downturn, but whether times are good or bad, discounting your price discounts your product.
During the last recession in the US both McDonald’s and Burger King put their Big Macs and Whoppers on sale so often that they trained their customers never to pay full price. That created a margin problem which ultimately took them years to recover from.
If you need to make your products more affordable, do so carefully and deliberately. But lower the price instead of offering a discount.
5Look after and reassure your staff
We live in a world where the latest news is a screen away. When news breaks, people know it, and economic news breaks every day. You don’t have to be an economist to know the business environment isn’t in the best shape right now.
Even if your company’s revenues are holding up during the downturn, your employees know there’s trouble and they’re nervous. Make sure they know you’re on top of things and have a plan.
There’s no telling what lies ahead over the next few months in South Africa. We may pull out of our economic rut more quickly than anticipated, or we may be in for a prolonged rough ride.
But one thing is certain, clients and customers will still need to eat. They still need transportation. They still seek entertainment, clothing, vacations, pet food, perfume, office supplies, computers, health products, and machinery. As the market tightens up, the best positioned players will survive and thrive. Avoid the mistake of cutting your marketing spend and you’re more likely to be one of them.