Learnings from Recession

Recession - the dreaded word and a phenomenon that shook the economies globally is slowly reeling into the dark. Thankfully, for most of us, the damage though significant, was quite short lived.
Learning on the way

You are well aware that billions of money was washed away from the bourses in hours, and with it dissipated the ambitious plans of many businessmen. The spillover from subprime financial crisis weakened both consumer confidence and consumer spending - much of it on credit - that had been buoying the Indian economy. 

During recession, consumers became value oriented, distributors were concerned about cash and employees worried about their jobs. But our experience and belief remained that the downturn was no time to stop spending on marketing. The initial reaction by marketers in response to recession was to cut marketing cost. On the contrary we felt it was the best time to invest in marketing activities. 

We all know that brands that increase advertising during a downturn can improve market share and return on investment. The connection between Share Of Market (SOM) and Share Of Voice (SOV) has been proven. The higher your SOV compared to your actual market share, the more likely your brand is to grow its market share in the subsequent year. In tough times, price cuts attract more consumer support than promotions. One is heard more when all others have shut their marketing mouths. So, if you increase your marketing investment at a time when competitors are reducing theirs, you should substantially increase the saliency of your brand. This could help you establish an advantage that could be maintained for many years. Therefore, a brand that increases share during a recession stands to benefit from this multiplier once the economy rebounds. A downturn also creates opportunity for the companies that are more efficient at turning marketing investments into revenue, since there would be less competition overall. 

Some companies therefore, viewed the recent recession as an opportunity to strengthen their businesses, invest aggressively and establish their advantage over their weaker competitors, whereas, others cut back, waiting for the recession to pass. At Koutons, we viewed recession as an opportunity to develop an aggressive marketing strategy which is providing extensive benefits to us now. 

I had witnessed that business-to-business firms that maintained or increased advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth than those that eliminated or decreased advertising. In fact, by 1985, companies who remained aggressive advertisers grew their revenue over 2.5 times faster than those that reduced their advertising.

I feel that to be a successful marketer, one should go to the basics and set them right. In this regard, the "Seven P Formula" is a sure hit which is bound to put a large number of issues on track. These seven are: product, price, promotion, place, packaging, positioning and people. As products, markets, customers and needs change rapidly, you must continually revisit these seven Ps to make sure you're on track and achieving the maximum results possible for you in today's marketplace.

To begin with, develop the habit of looking at your product as though you were an outside marketing consultant brought in to help your company decide whether or not it's in the right business at this time. Whenever you're having difficulty selling as much of your products or services as you would like, you need to develop the habit of assessing your business honestly and asking, "Are these the right products or services for our customers today?"

We did a similar exercise at Koutons, where we always believe in providing quality products to the masses at affordable prices. We are getting an overwhelming response to all our product range which could be justified with an over nine per cent increase in our profit margins in the last quarter.

Marketers must reforecast demand for each item in their product lines as consumer’s trade down to the models that emphasise good value. Tough times favor multi-purpose goods over specialised products, and weaker items in product lines should be pruned. Gimmicks are out; reliability, durability, safety, and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, should still be introduced, but advertising should stress superior price performance, not corporate image.

The retailers must develop the habit of continually examining and re-examining the prices of the products and services being sold. Price elasticity curves are changing. Consumers take more time searching for durable goods and negotiate harder at the point of sale. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today’s can-do-without.

Sometimes you need to lower your prices. At other times, it may be appropriate to raise your prices. For example, around seven months back the prices of property in Dubai were much cheaper than that in Mumbai, because of the high demand. But now, developers have reduced the prices of their projects looking at the demand and global meltdown. On the other hand, Maruti, the largest small car maker in India, had recently raised their prices of some selective cars looking at the increasing demand.

Sometimes, you need to change your terms and conditions of sale. Sometimes, by spreading your price over a series of months or years, you can sell far more than you are today. At other times you can combine products and services together with special offers and special promotions. You can also include free additional items that cost you very little to produce but make your prices appear far more attractive to your customers. Like now a days, you will see sales and discounts on every second store offering best deals to the customers in the wake of ensuing festival season.

As a business, we must think in terms of promotion all the time. This is not the time to cut advertising. Uncertain consumers need the reassurance of known brands, and more consumers at home watching television, can deliver higher than expected audiences at lower cost impressions. 

We need to develop the habit of reviewing and reflecting upon the exact location where the customer meets the salesperson. Sometimes a change in place can lead to a rapid increase in sales.

You can sell your product in many different places. Some companies use direct selling, sending their salespeople out to personally meet and talk with the prospect. Many companies use a combination of one or more of these methods. In each case, the entrepreneur must make the right choice about the very best location or place for the customer to receive essential buying information on the product or service needed to make a buying decision. 

Packaging is the ‘in’ thing today. Develop the habit of standing back and looking at every visual element in the packaging of your product or service through the eyes of a critic.. Remember, people form their first impression about you within the first 30 seconds of seeing you, or some element of your company. Small improvements in the packaging or external appearance of your product or service can often lead to completely different reactions from your customers.

You should also develop the habit of thinking continually about how you are positioned in the hearts and minds of your customers. We at Koutons pay a lot of attention to positioning of our products. Looking at our target audience we have positioned our products as quality products available at affordable prices. I believe that companies should develop the habit of thinking about how they could improve their positioning from time-to-time. If the company could create the ideal impression in the hearts and minds of the target customers a life time of association is created between the customer and the company.

Finally, I recommend that we must implement the SMART marketing during the times of financial distress. SMART marketing consists of the following –

S - Strategise

M - Maintain market spend

A - Assess and allocate the budget

R - Research your customer thoroughly

T - Target and reach out to them 

The best strategy for your brand will depend on a number of things: the nature of your category, your category’s size, the inclinations of your customers, your brand’s strength relative to others, and, most important, the actions and reactions you expect from your competitors. 

A new product launch may actually have a greater impact during recession than at other times, for several reasons. A product that is unique or demonstrably better than others should be able to command a higher price, even among price conscious shoppers. Competitors who are running scared may be late in countering a new product with their “me-too” offerings. And, because media costs are likely to be lower, advertisers should get more profit for their buck. These savings may be compounded by the relative ease of cutting through in a less cluttered atmosphere. 

Provided that its price is in an acceptable range, people will be more likely to bet on a known and trusted brand than a cheap one. During a recession you need to remind people why your brand is worth the price by focusing on functional advantages.

A major key is to know your consumer. Know them inside and out. Know what they think and know where they are. Know how these economic times have hit them. Reach out to them. Look and revise your product line if necessary. 

Even if we are not in a recession any more, we are in for some tough economic times and an economic slowdown means a tendency to scale back marketing spending. However, I believe that a downturn creates opportunity to accelerate growth faster than your competitors. This means it may be the best time to step up your marketing at least in quality if not in quantity.  

**********
 

Publish Date
Not Sponsored
Live: People Reading Now
 
 
 
 
TRENDING ARTICLE
RECOMMENDED FOR YOU