Proven Strategies to Grow While the Competition Withers
In early December, JPMorgan CEO Jamie Dimon said he does not view recession as “a bad thing.” Dimon said, “It’s bad for America, it’s bad for people who are unemployed but it’s usually an opportunity for JPMorgan.” Dimon’s comment reveals the dirty little secret about recessions – strategic business leaders see recessions as unique opportunities for growth. The Great Recession was actually very good for a group of high performing businesses. How good? A BrandZ Global Brands study in 2010 revealed that the value of the world’s top 100 brands increased by four percent in 2009.
While 86 percent of industries reduced production during the Great Recession, (Isidore, 2009) other businesses thrived. These high performers increased sales, gained market share and recruited superior talent away from their toughest competitors. Their leaders smelled opportunity when everyone else began to panic. The proof is documented in a 2014 study, “The impact of economic downturns on marketing” conducted by David Nickell, Minna Rollins and Justin Ellis for the University of West Georgia/Richards College of Business.
The Richards College study states that many of the businesses that outperformed competitors were prepared for a downturn — they either had a plan in place or operated within an entrepreneurial culture that made it possible to quickly adjust their plans when the downturn began. The research incorporates a fascinating collection of data from nearly a dozen past studies documenting business behaviors during U.S. recessions spanning four decades.
By following the actions companies took during downturns and the impact of those moves on the firms, the Richards College study reveals the best practices that helped companies excel, survive or, like Lehman Brothers, Circuit City and 156-year-old A&P, go belly up and disappear from the corporate landscape.
The vast majority of businesses reacted to the Great Recession by cutting marketing budgets. Across the business-to-business sector 60 percent of companies reported cutting marketing by an average of more than eight percent.
And while not every action in a downturn has an equal and opposite reaction, there are some interesting insights from the two-year period known as the Great Recession. For example, sales of sugar and sweets were down almost seven percent while sales of fruits and vegetables rose nine percent. Grocers who recognized the trend and adjusted selections fared far better than the rest of the category. Apparently, A&P was not reading the same research as Target and Walmart. Both Target and Walmart acquired news customers while A&P was becoming defunct in 2009. This kind of insightful and entrepreneurial leadership enables some businesses to thrive while others struggle, and many fail.
Before we get to the best practices of marketing during a downturn, let’s take a moment to point out what your organization should not do when the next downturn arrives.
Across-the-board personnel cuts are the single worst thing a company can do in a downturn according to Philip Kotler and John Caslione, co- authors of “Chaotics, The Business of Managing and Marketing in the Age of Turbulence.” Companies that focused on communicating to and motivating employees during downturns experienced an increase in productivity, according to the Richards College study.
One business leader interviewed for the study said, “We cut back our external marketing communications and reallocated a good share of it to internal communications with employees. We wanted to keep them informed about what we were doing to address the recession. We really wanted to keep them motivated.”
Every organization must reassess its talent investments during tough financial times. Organizations that thrive in recession focus not on wholesale cuts but rather on improving the quality of employees. Focusing on the quality of talent allows organizations to leverage the first of the three best practices of navigating a downturn according to the Richards College of Business study:
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