Stopwatch Marketing Blog

Officially, the U. S. economy refuses to enter a full-scale recession. I’ve enjoyed all the euphemisms – “slowdown,” “contraction,” “turndown,” “softness, “pullback,” and my personal favorite, “growth recession.”

I am struck, as well, by how long we (especially the business press) have been anticipating a recession that somehow refuses to arrive. In fact, we did a post on this in mid-December, 2007: http://www.stopwatchmarketing.com/blog/2007/12/13/recessions-are-opportunities-or-now-is-the-time-to-bury-the-competition/.

In that post, subtitled, “Now is the time to bury the competition,” we argued that the best time to do so is when THEY are cutting back. When the competition is afraid of increasing advertising budgets or adding sales staff…that is the moment when you, armed with complete confidence in YOUR strategy, move in for the kill. Confidently. Decisively. Remorselessly. With all that rousing “get up and go after them” behind us, it occurred to me that we ought to think clearly about how to actually attack the competition during a slowdown.

So, we took a look at the last very big slowdown – in the 1970’s and early ’80’s to develop a three-step how-to:

What to do?

Step One: Be absolutely clear about your strategic objectives. Slowdowns are exactly the time when the entire organization should have no question about the overriding strategic objectives. Tradeoffs will have to be made – between, for example, pursuing share growth or maintaining profit margins. Management must be both clear and fully in alignment on the strategic imperatives in four areas:

1. Financial Measures – Are we primarily committed to maintaining profit margins (for Wall Street credibility because we just spun this company off, for example?) or are we primarily concerned with the opportunity the slowdown provides to grab market share?
2. Maintaining Relationships – Which consumer, trade, and supplier relationships will be absolutely critical long-term? How then do we maintain or strengthen them? Which do we “prune?”
3. Maintaining Product, Service Viability – What features / benefits MUST remain part of the core offering? How do we make sure we are communicating them to continue to build brand equity?”
4. Competitive Attack – Which competitors should we directly attack?

Step Two: Be sure you understand your brand, its ability to carry a price premium, and the competitive situation it faces. This set of decisions can be reduced to a standard 2 X 2 matrix:

	Value Brand Offering	Premium Brand Offering
Non-competitive environment	“Solidify Franchise”(Japanese Cars)	“Grow the Category”(Apple Computer, Federal Express)
Competitive Environment	“Offer a Better Deal”(Wal-Mart, generics,)	“Circle the Wagons / Build the Brand”(Budweiser, Stouffer, Owens-Corning)

Step Three: Re-evaluate and re-adjust your marketing strategies as appropriate. If your goal is profitable customer and market share growth, then the opposite of the current economic obstacle is the opportunity that it creates for new, brand and market strategies. Culling through the archives, we’ve developed a list of important do’s and don’ts that you should be thinking about now.

Do’s and Don’ts

Do’s	Examples From Previous Slowdowns
Do find markets that you have previously under-developed (geographies, industries, age brackets, etc.) and raise your level of execution in them. See CK Kerley.	Wal-Mart, Stouffer
Do identify new customer segments – ones often created by the new, emotional needs that arise in times of a slowdown – and target them with tailored offerings. Be certain to make DESIGN a strategic weapon.  See Gavin Heaton’s POV on this.	Japanese Cars, Owens-Corning insulation, Apple Computer, Chrysler minivan
Do invest in brand building: First, re-focus, if necessary, A & P spending on the most productive, brand-building efforts. And exploit emerging, under-utilized communication channels. See Jay Ehret’s treatment of text messaging. Second, update your understanding of how your current customers choose between different brands.	Budweiser, Levi’s, Chrysler minivan, Dannon Yogurt
Do target the customers of the competitors who are weak and of competitors who “flinch.” And make absolutely certain you can maintain a real differentiation. See John Jantsch’s post on Duct Tape Marketing.	Apple Computer, Levi’s
Do exploit emerging technologies, introducing new products or features and benefits. For examples of how to use TODAY’S emerging technologies (search engines, social media, etc.,) see CK’s Blog and/or Toby the Diva’s.	FedEx, Wal-Mart, American Express Gold Card
Do re-evaluate your portfolio of brands and allocate more funds to those brands where the brand itself plays a greater role in a customer purchase (remember, while all brands are names, not all names are brands that drive customer choice).	Heineken, American Express Gold Card, Designer jeans
Do patiently, consistently, remorselessly focus demand creation and activation funds (e.g. advertising, promotion) on A) Real, proven, working A & P dollars (See Drew McLellan) and B) Your value-driven brands, not on your premium priced ones. Go for the volume and ROI.	Japanese cars, Generic consumer goods
Don’ts
Don’t devalue your existing brands by sending messages that lead with low price, unless that is the positioning that you want for them in the long term.	Atari, Farah
Don’t halt a focus on innovation – but do much more “emulation” rather than trying for pure, new-new innovation. Identify, prioritize and adapt the most successful, new ideas from other industries and companies rather than starting from scratch. And be sure to make “Strategic Design” a critical part of the organization’s efforts. See Mario Vellandi.	Xerox
Don’t abandon channels or channel partners you will want to have later.	Farah
Don’t lose your focus on heavy users and high value customers. Understand who they are – if they are changing – but remember that this is typically the core of a brand’s franchise and often the source of more that 100% of its profits. And make CERTAIN you understand them…their needs, their dreams, their hopes, their fears, their personas. For a very good treatment of this issue in today’s environment, see David Meerman Scott’s recent post.	Schlitz

While slowdowns can be scary and painful, they also have salutary effects. They force companies to refocus efforts on strategies that genuinely build businesses and powerful brands. For those who accept this challenge and make the right choices, slowdowns can be a period of growth and success.

 

Tags: Uncategorized //