Introduction First, it is important to know that recession is a normal part of the business cycle. The Indian & U.S. economy will come through a downturn or recession and then enter a new period of growth. But the hard truth is most recessions last about 16 to 18 months. This latest one began in December 2007, but will probably last into 2010. And with the government scrambling to implement dramatic economic policies that will likely because more harm than good, some economists project that we won't see the end until mid2011. Whatever the length, you can increase cash flow and profits now...and secure a major advantage over your competitors. You can also expand your market share in the next few years.
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Anticipating economic reality: Knowing the 4 economic trends Before we look at the recession marketing strategies that you will need to survive and thrive in this recession, every marketer should be aware of 4 basic economic trends that will affect your campaigns
1. Deflation A downturn in the economic cycle reflecting declining prices and a credit contraction. Our current historic deflation was predicted by a number of economists and investment advisors over the past few years. It's not a recession, but an economic crisis of inflation accompanied by a recession.
2. Inflation A rise in the general level of prices of goods and services over time caused by high rates of growth in the money supply. Inflation can be thought of as a decrease in the value of the unit of currency. It is measured as the rate of change of a price index. Because of the massive government bailouts and deficit spending, this will be your marketing enemy in a few years. For example in USA, Under the Carter administration, inflation shot up over 12%. Under George W. Bush, it was up to 6% by November. Now it's dipped back to about 3.4% because of deflationary pressure. Expect to see inflation rise at the start of next year. 2
3. Recession A significant decline in activity spread across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP). Unemployment is still lower than it was under Jimmy Carter.
4. Stagflation A condition of slow economic growth and relatively high unemployment. It is a time of economic stagnation accompanied by a rise in prices, or inflation. This could be what we are headed for, lasting for 5 to 10 years. By anticipating and understanding these economic realities, you can better adjust your marketing message and strategy. The key is to approach your challenges strategically and tactically-rather than act out of emotion and fear. When the late Sam Walton, founder of Wal-Mart, was asked what he was going to do about the recession years ago, he answered: "We don't plan to participate."
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MARKETING STRATEGIES: Strategy #1:
Retrospection
Re-examine your current marketing initiatives Image advertising is a waste of your time and money, especially in a time like this. If you're not using advertising that provides a measurable, quantifiable cost per lead, cost-per-sale and lifetime value of a customer, you're practically throwing your money away. You absolutely must know your: • Cost per lead • Cost per sale • Lifetime value (LTV) of a customer In a recession, it is more critical than ever to hold every marketing campaign accountable. That's the only way to know how you should react in a down market and get the maximum impact for every single dollar spent. For example, the lifetime value Publisher's Corner of a customer tells you exactly how much you can afford to spend to acquire a new customer. Without these statistics, it is impossible for you to know whether you're making the most profitable use of your marketing budget. It's the only way you'll know whether you're getting a positive or a negative return on your investment.
Strategy #2:
Review USP
Review your Unique Selling Proposition (USP) A powerful USP will grab prospects' attention, distinguish you from competitors and draw them into your story. Now is the time to review and revise your USP. If it doesn't tell your prospects how they will benefit from your product in today's downturn and distinguish you from the competition...chances are you'll become irrelevant. Your USP needs to be prominent, easily found and up-to date in all of your marketing-TV, direct mail, website, you name it.
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Strategy #3: Counter
attack market evils
Address marketing evils with preemptive copy Marketing evils are the barriers that stand between your customer and their decision to buy from you. They create skepticism toward your product. Today's marketing evils include: • • • • • •
Economic crisis Recession Competition Legal and regulatory changes Budget cuts Unemployment
When money is tight, fear of making a poor purchasing decision is high. Prospects will question what you say and raise more objections that prevent them from buying. Don't ignore the worries, fears and concerns that are plaguing your prospect. Instead, use preemptive copy to address and overcome prospects' skepticism. Well-executed copy for this recession will achieve the following 4 goals: Address and dismiss your prospects' objections. Demonstrate how your product solves their most pressing problems. Explain why your product is absolutely necessary-even in an economic downturn-and why it's in your prospect's best interest to buy now. Clearly demonstrate why an alternative choice is not going to cut it
Strategy #4: Be
Opportunist
Take advantage of dropping marketing costs Media spending is plummeting and we haven't hit the bottom yet. As a result, online and offline media costs are dropping-and, in some cases, this trend is likely to be long-term or permanent. Here's where I've successfully helped marketers with cost-cutting negotiations: • Printing • Media costs • Lists • Postal discounts • Media options 5
The price of radio and TV time has seen deep cuts-which may be why the ubiquitous Snuggie(TM) ads aren't confined to late-night TV spots. In addition to lower costs, you'll find deals and opportunities never seen before. For example, many local newspapers and even The Wall Street Journal are selling ad space right on the front page.
Strategy #5: Tempt
Customer
Reevaluate your offer and make it preemptive in this recession, consumers are hunting for the best way to get more for their money. It's critical to update your value proposition so that it's powerful and preemptive: It should answer prospects' questions before they ask them and overcome their objections. Remember, your offer is not about the product-it about the prospect and what the prospect gets. The strongest offers reinforce value. They focus on the deal that the prospect will receive and present a get-more for-your-money image. Here are 3 components of a successful offer: A discount or price reduction. Right now people are looking for value, and a discount is the simplest way to deliver it. Just look at the most successful catalogs, emails and mailing pieces. You'll find discounts in every one, from consumer retailers like J. Crew to B2B marketers like Thermo Fisher Scientific. Even designer makeup and beauty products are on sale, which is rare. A premium. It's a gift, a bribe, a strong enticement: Add value by giving something away. This can help you justify a higher price if you are unable to offer a hefty discount. A guarantee. Reassure your prospects that they have nothing to lose. If you don't have a guarantee, now is the time to start one. Convince prospects that they'll be losing out on something big without accepting your offer - recession or no recession.
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Strategy #6: Concentrate
on Database
Concentrate on your database for most marketers, 20% of your customers represent 80% of your profits. Any significant loss of this core group could mean a serious hit to your sales, profits and future. Remember, it is always three to four times cheaper to up sell or cross sell an existing customer than to acquire a new one. That's why you should implement these customer-retention strategies: Up selling and cross-selling. Reevaluate your current process. Are you being aggressive enough in offering products or services that complement your prospect's purchases? Loyalty programs. It is more important than ever to reward your best customers with extra perks to keep them coming back. Creating an exclusive club for loyal customers is also effective. Conversion series. If you offer a free trial, be sure you have a professional follow-up direct marketing conversion series in place to convert these prospects to buyers. Many marketers make the mistake of letting qualified, interested prospects slip away easily. See the chart above for an example of a conversion series time line. Retention series. Don't wait around for your customers to renew subscriptions, reorder products or come in for your services-remind them of your value, and reinforce their decision to purchase from you. Database lead management. If you don't convert those hard-earned leads to sales, you're wasting your marketing efforts. Reactivation campaigns. Use your improved, preemptive offer, complete with premiums and discounts, to entice former customers to come back. Craft copy that demonstrates why your product is the best choice right now.
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Strategy #7:
Update Corporate Website
Revamp your corporate website Static corporate home pages do nothing to encourage sales or improve your results. Yet so many marketers still rely on these non-marketing or antimarketing sites. Instead, turn to direct marketing micro sites and landing pages: Individual websites geared toward specific products and promotions. These sites use only direct response copy and art to sell a product or service. To improve efficiency and boost response, they don't have navigation distractions. For example, you may want to create unique pages to capture leads and sales, or develop a product-specific sales page.
Lastly: Marketing is all about the 4 Ps which are:-
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Illustration McGraw-Hill Research published a study of 600 companies in 16 industries over a 5-year period that included a recession. Researchers concluded that firms that chose to maintain or increase their marketing budgets experienced sales growth that was 256% higher than those companies whose advertising suffered. Furthermore, those who cut back on their advertising realized a small increase of only 19% in that same time period. Here is another lesson learned from the last recession: The 25% of companies that increased their marketing budgets saw an increase in market share that was 2.5 times greater than competitors who cut back. But that's not all you need to know. Here's what I've learned from past recessions... Companies that don't adjust their marketing to the new economic environment suffer. Businesses that follow the direct marketing model trump those who rely on traditional advertising. Historically, companies maintaining or increasing their direct mail marketing through economic downturns increase sales and market share during and after the slow period. Businesses that regard direct response advertising costs as investments rather than expenses enjoy higher long term dividends. Companies that stay aggressive in a downturn seize market share from more timid competitors. Companies that cut back will lose revenue and opportunities, with fewer up sells and cross-sells for several years after the recession...profoundly impacting the bottom line in the long-term. Lesson learned: Think twice before arbitrarily cutting your budget. With so many of your competitors cutting back, we'll have new opportunities for growth.
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Ideas Follow-up on Old Leads Bring out every old business card, brochure or any other lead that you may have and start calling your contacts. You will need perseverance, because you might not strike gold in your first or even your second try. But keep on following those leads, since you don’t have anything to lose - and lots to gain if you can pull it off. Take out any old inquiries that had not been converted into orders and ©follow up on every single one of them. Take Extra Care Of Your Existing Clients Your existing clients are what keep your business running during lean times. You will need to take special care of them, since your competitors will no doubt have their eyes on your clients. Remember, they are also facing rough economic weather as well. Keep in regular touch with all of your customers, even those that have only purchased from your business once. Tell them how you appreciate their support over such a trying period without mentioning the word 'recession'. You can also reward them by offering them special discounts or gifts as a token of your appreciation. Let them know that you appreciate their business and their loyalty. As existing clients are the opportunity for a firm to Cross Sell and up sell at relative lower cost and can be easily turned up from Suspects for the Service to the actual customer.
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Take the Road Less Traveled To Find New Clients If you have rigid views on taking in odd or small clients, then you should become more flexible. If you have not previously entertained clients with different needs, such as smaller orders or staggered deliveries, now is the time to do so. Keep an open mind and bend your rules a little to accommodate them, since they could not only pull you out of the recession, but over time could bring in new clients. As serving many small clients monetary worth is relatively low but provide ability to firm to cover operational expenses and also number of clients served are high and is the product/ services delivered is appropriate and meets the quality standards the possibility for gaining new business by word of Mouth exist and increased many folds. The best part is that if their business grows quickly, then their order values could quickly come into your regular scope of business. There is no financial harm in servicing smaller clients or those with special needs, as long as it doesn’t eat into your profits. You can start by taking a few trial orders before deciding if this route suits you or not. Increase Your Level of Service In times when competitors are trying to undercut each other on price, let your service level be a notch higher than the others. Satisfied clients are sure to bring in new clients for your business. Most important is to distinguish service offered to the clients and convinced that they are getting much more than they were expecting. During recession time it is really important to realize that the customer is truly King in these trying times - and it will also ensure their job security if they perform well in their jobs.
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Give Your Clients Something More - Customer Delight If possible, provide additional services to your clients by providing them with additional warranty on your products and services. Offer on site service or telephone support. This will not drain your pocket to a large extent, but will go a long way in pleasing potential and existing clients. It is during tough times that you need to alter your marketing strategy to survive to sell another day. The above marketing strategies are not very costly to implement, but can pay you rich dividends - both during and after the recession Businesses and consumers are cutting back on discretionary spending, which could mean lower response rates for you. On top of that, many marketing budgets are being cut. This combination has sent many marketers into a panic. That's why you need to reevaluate your marketing game plan for this recession.
Research the customer. Instead of cutting the market research budget, you need to know more than ever how consumers are redefining value and responding to the recession. 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 todays can-live-without. Trusted brands are especially valued and they can still launch new products successfully, but interest in new brands and new categories fades. Conspicuous consumption becomes less prevalent.
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Support distributors. In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing and generous return policies motivate distributors to stock your full product line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardize existing relationships and your brand image. However, now may be the time to drop your weaker distributors and upgrade your sales force by recruiting those sacked by other companies. Adjust pricing tactics. Customers will be shopping around for the best deals. You do not necessarily have to cut list prices, but you may need to offer more temporary price promotions, reduce thresholds for quantity discounts, extend credit to longstanding customers, and price smaller pack sizes more aggressively. In tough times, price cuts attract more consumer support than promotions such as sweepstakes and mail-in offers. Stress market share. In all but a few technology categories where growth prospects are strong, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact. Companies such as Wal-Mart and Southwest Airlines, with strong positions and the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can do so by 13
acquiring weak competitors.
Emphasize core values. Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners, and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees. Economic recession can elevate the importance of the finance director's balance sheet over the marketing manager's income statement. Managing working capital can easily dominate managing customer relationships. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.
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Conclusion Even if we aren’t in a recession, we are in for some tough economic times — and an economic slowdown means a tendency to scale back marketing spending. However, research shows 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 quantity. The marketers that focus on getting the most out of every dollar spent and on demonstrating marketing’s impact on revenue and pipeline will be well positioned to come out of the slump looking like a star.
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