It's still unclear how serious the current slowdown will be or how long it will last. So why not stop worrying about it and follow the lead of those firms that grew stronger during previous recessions. That's right, stronger.
According to studies by McKinsey and others, companies that have prospered during recessions were those that actually spent more on selling, general and administrative activities as compared to both the industry average and those companies that lost market leadership. They did so because their corporate culture was focused on creating superior customer value profitably, as opposed to being the stingiest spenders.
This time around, instead of implementing knee-jerk, belt-tightening practices, why not follow strategies that have proven successful in the past?
Here's the catch: Spending money is the easy part, and a fool can do it as easily as a sage. So the key is to spend money on the right activities. Here are the seven tactics that need senior management's attention even more during a downturn:
- Review your mission statement. Does it emphasize creating superior customer value profitably? Why would you cut costs that will hurt your ability to achieve that goal?
- Take this time to be sure you have the right team. Remove only those individuals who don't contribute to profitably creating superior customer value. Don't do across-the-board cuts.
- Check in with your customers; don't make them your least important constituency. Make sure you know your target customer inside and out.
- Keep tabs on your competition. Know your competitors' short-term strengths and weaknesses, and long-term strategies—not so you can copy them, but so you can create differentiated value for customers.
- Keep your employees in the loop. Share insights across the organization so everyone knows how to create superior customer value.
- Take a longer-term view. Don't make decisions entirely on short-term needs at the expense of the long-term. Consistently successful firms are able to wisely balance the short-term/long-term tradeoff.
- Price strategically. We see increased temptation to cut prices in an economic downturn. Resist! Price competition destroys market value. Customers never buy on price. Let me repeat that: Customers never buy on price. Customers always buy on value, no matter what they tell you. There are two elements in the value equation—benefits and costs. If you are offering superior customer value, make sure you are effectively communicating that to buyers. If you offer inferior value, price accordingly.
In summary, remember that aggressive firms grow during recessions. Your organization's culture drives performance, so consider becoming more customer-focused in order to capture market share. Focus on creating and communicating differentiated value, and price strategically.
Linden R. Brown is co-founder of MarketCulture Strategies, a professional services firm with offices in San Francisco. He can be reached at email@example.com.