Why recessions should encourage radical thinking
A pandemic such as that of Covid 19, is a world-wide phenomenon, which although rare, is not unique. As a result all the major economies are experiencing a recession to a greater or lesser extent, and are unlikely to return to appreciable growth for many months. Short of a miracle, it is unlikely that in most market sectors there will be any appreciable increase in demand in the first half of next year. Consumer confidence will take many months to restore to a level where demand can be seen to be growing to any noticeable extent.
Much of what is predicted fails to materialize and can often be simply wrong.
What is certain, is that there is little that can be done to affect the level of demand. In a recession, demand does not go away, it is only deferred until the consumer is confident enough to buy, or is forced by necessity to purchase. In the meantime, the marketing manager must use resources wisely to maintain a level of income, and conserve the marketing assets as far as possible. In such circumstances the marketing manager should actively consider doing a number of things:
- Maintain close links with existing customers, monitoring their needs and changing requirements.
- Use the knowledge of the changing needs of existing customers to target new potential customers.
- Consider the problems and fears of customers and potential customer and adapt the product or service to meet their changing needs.
- Continue advertising and promotion, even on a reduced budget, because the market needs to know that your product and service is available rather than that of the competition.
In addition there are a number of possible scenarios that the marketing manager should consider in difficult economic times;
- Prime contracts fail to materialize, or are reduced.
- Key customers seek to price reduction or longer credit.
- Increase in payment defaults.
- Increase in aggressive activity from competitors.
- Forced reduction in the marketing budget and resources.
- Adverse Government legislation.
- Difficulties in maintaining necessary supplies.
While some of these possible scenarios may seem unlikely, in difficult economic times, none are impossible. It is the task of the marketing manager to produce and maximize the profitable income on which the future of the business depends. Therefore when considering what lies ahead in 2021, marketing managers should consider scenario planning as an important management tool, considering all possibilities and planning for the worst, while still hoping for best.
There is nothing like necessity to concentrate the mind. Regardless of what either government or economist may say about the state of the economy, the marketing manager is still responsible for producing the financial income on which the business depends and is faced with the realities of the market in the level of demand, the volume of orders, number of customer creditors, and the rate of cash flow.
It is a general observation that in a recession, work gets harder and results take longer to achieve. In this situation, what can and should the marketing manager do? Cutting budgets is a crude but effective way of making savings, but it does not increase revenue or cash flow. Advertising and promotion costs are easy to cut , but research has shown that companies that continue to advertise during a recession do better than those that don’t. Reducing corporate advertising may have little direct effect on sales, but a reduction in product advertising may be counter-productive.
Alternatively, improved efficiency may produce cost savings, which may in turn improve the return on investment and the overall level of profitable revenue. Each area of the budget needs to be assessed to ascertain where the money goes, to what purpose, and to what result. In every case, marketing managers should be asking:
- Are we doing this right?
- Could we do this better?
- If so, how?
- Has anything changed?
- What has changed?
- How has it changed?
It may be the case that there is little that can be done to hasten customer decision making in the short term. Special offers and credit options may be helpful in converting slow customers, but they should generally be avoided if the results do not contribute to overall profitable income. If the current customers are not producing enough income, then ways to increase the potential customer base may need to be considered, including diversifying into other markets, products and services.
It is important to get the opinions of those directly in contact with the customers, in order to understand their customer’s problems, and to encourage their ideas to save money, cut waste and increase productivity. Some ideas may be radical, and some may require investment, but if valid ideas and suggestions which emanate from the staff directly involved with customers, are implemented, they are more likely to be successful than those imposed by management, who are not directly acquainted with the problems.
In these circumstances, marketing managers need to:-
- Know which areas produce the most income, and which are the most costly to service.
- Consider whether some of the customer base can be served by other means.
- Look for alternative ways for increasing the number of enquires including seeking new markets.
- Consider whether current methods of selling are still suitable for the current market conditions or could others be considered as an addition or alternative?
Necessity is the mother of invention. A slowdown in demand can bring new opportunities by enforced radical thinking. Being responsible for producing the profitable revenue for the business, marketing managers should not be afraid to question what they do and how they do it, and look for new ways to improve efficiency in producing their financial contribution.