How to grow through an economic downturn
Hi, my name is Tam and I’m the Head of Growth at Webprofits. Today I’ll be sharing some advice on how to approach marketing during turbulent times.
To say it’s been a strange start to 2020 would be an understatement and it looks as if we won’t be returning to normality for a while yet. Once things calm down, we’re inevitably going to be facing an economic downturn that will take some time to recover from.
In testing times like these, businesses are often confused about the right approach to take. In this video I’ll cover what’s worked in the past as well as recommendations on what to do next.
One thing we can say confidently is that downturns always end up turning back up.
Whether it’s the global financial crisis of 2008, the dot com boom in the early 2000s or even the great depression in the 1930’s, history is full of success stories of organisations who not only survived, but thrived.
A quick google search will help you find plenty of these examples from a range of sources but I’ll be focussing this video largely on the findings of a Harvard Business Review article from March 2010.
In the study, they reviewed the performance of 4,700 companies prior to, during, and after three global recessions. The 1980 crisis, the 1990 slowdown, and the 2000 bust.
They identified that companies took a combination of 4 different actions, two defensive and two offensive.
- The defensive actions were
- employee reduction through redundancies
- And operational efficiency – reexamining every aspect of their business models to reduce operating costs.
- Offensively, they found that companies either
- invest in market development – adding new product lines or expanding into new markets
- or invest in assets, buying machinery, technology or other assets needed to deliver their product or service.
No company can rely on just one of these actions to get through a recession, but interestingly they found that there was an optimal combination of actions which yielded the best return.
Companies who invested in new assets as well as new markets, but didn’t seek to cut costs by reducing employee headcount grew faster and stronger than any other combination of actions.
This table shows the 3 year compound annual growth rates for each combination.
So what does this mean for your business?
Well firstly it’s important to point out that these are averages, there are going to be winners and losers in each category so the right solution isn’t the same for every single company.
It’s also important to note that this graph shows a number of different strategies, those strategies still need to be executed well in order to succeed.
But it does seem to suggest that the right thing to do in a downturn is to invest in your growth while simultaneously finding efficiencies in the way you operate.
Each individual scenario will be different and you need to assess what you can and can’t afford to do but here are some tips I would broadly recommend.
Make sure you act
First and foremost, you have to act. Unless you’re in the fortunate position to naturally buck the trend and do well in a downturn, doing more of the same is not going to help you grow. Even if you are one of those businesses, taking the right action will help you grow a lot faster than your competitors.
Know your runway
Next – know your runway. Your runway is the amount of time you have until the money runs out. It may sound morbid but understanding the numbers behind this will help you to make the right decisions.
It will help you understand how much you need to cut or how much more you’ll need to sell in order to stay in business.
Speak to your customers
Thirdly – speak to your customers. They are your source of revenue so understanding how their needs and wants is critical to keeping that revenue flowing.
They can help determine where you should be investing and innovating as well as informing you of what they don’t value – giving you insight into areas where you can make cost savings.
Invest in your marketing
Based on the study I just spoke of, I would say look to invest in your marketing but don’t expect it to be business as usual. The reasons why customers continue to buy from you will likely change as purse strings are tightened and costs are cut, finding the message that resonates will help you grow.
On top of that, ad inventory is likely to be a lot cheaper as other companies pull their advertising in order to make savings. Make the most of it.
Make the most of existing assets
Don’t rely solely on paid advertising to make sales, you should have assets that you can leverage. For example, email marketing campaigns cost very little and allow you to contact potential customers who are already used to receiving content from you.
Repurpose content that you already have to save on the cost of creating content, then combine this with your email marketing to really drive growth.
Have a think about what else you already have at your disposal so you’re making cost-effective marketing decisions.
Invest in your brand
Lastly, even if you can’t invest in marketing aggressively, I would suggest that you at least look at investing in your brand. Your customers may have very little to spend now but that doesn’t mean that they don’t want to hear from you. Continue to nurture new business and when the green shoots of recovery finally show, they’ll be ready to buy.
Businesses globally are going to be doing it tough and there is no one path to growth at the best of times. Whatever actions you choose to take, do your research, think about the consequences, and act decisively.
I’ll be sharing the link to the harvard business review article, as well as a number of other resources in the comments or post of this video, be sure to check them out if you want more information.
And if you want some more tailored advice on how to approach your strategy, get in touch via our website and we’ll see how we can help.
That’s all from me, thanks and speak soon.