Six Ways to Deal with the Stalled Economy
By Michael Barr
This is no time for business as usual! To keep the customer and win the sale, the marketer has to outmaneuver the competition. But how do you motivate your customers to spend their marginal purchasing dollars on your product instead of the competition's?
Answer: Use smart tactics to navigate the tough times ahead. You'll not only protect your sales, revenue and profit margins, but you'll also find your business in a better position to grow when the economy finally turns around.
1. Instead of cutting marketing/advertising budgets across the board, tighten your targeting to reach customers where you have a 50 percent or better chance of winning the sale.
Cutting budgets across the board is never the right strategic move. It's more effective to use segmentation to identify product loyalists and high-probability customers. Focus on opportunities that reach key buyers. Here are a few examples:
- The National Restaurant Association (NRA) projects while restaurant growth may decline, the managed services segment will grow by 1.4 percent in 2009. The managed services segments include schools, colleges and universities, healthcare, hospitals, and other institutions. Kitchen equipment manufacturers should target this segment of the food service industry versus restaurants.
- If you're a flooring manufacturer selling to hospitals, schools, car dealerships and large retail stores, it's obvious now's the time to concentrate marketing on hospital and school construction.
Now more than ever you have to identify and target key prospects to maximize your valuable marketing/advertising dollars.
2. Arm your sales force with positive messages and encourage them to solicit valuable feedback from customers.
Why? You can control the message and reduce speculation. The first question customers will ask is "How's business?" Give your sales force positive talking points. For instance:
- "Equipment sales are down, but service revenue is up."
- "We're putting a lot of effort into improving a specific product's performance."
- "We've made changes to deliver more value by______."
- Including the training videos with the standard product.
- Offering same-day shipping.
The sales force can use this information to initiate a conversation and engage the customer. The discussions should be a two-way exchange. Stress the importance of listening to the customer to gain useful insights.
Operating in a communication vacuum reduces productivity. Keep your team focused and upbeat by giving them something productive to talk about, and continually emphasize their role in gathering important customer feedback.
3. Focus your advertising messages on tried-and-true product performers, rather than new models with bells and whistles.
Buyers are more cautious and taking fewer risks. Promote your product's low-risk features, including no maintenance/repair costs, no training issues, and reliability versus faster and more innovative alternatives. Make sure your messages stand out.
Know your own capabilities and stay focused on what you do well. Be true to your brand's value proposition. Look to package your existing capabilities in more fresh and relevant ways.
4. Shift promotional efforts to products/services with opportunities for growth.
Seek out industry data and quality information—it's all around you. The marketer who bases decisions on the best information from reliable resources will take the lead. Given the current political climate, keep a sharp eye on what is happening in Washington and how it may impact your sector.
American Equipment Manufacturers (AEM) forecasts sales of construction equipment will be down, but sales for attachments will increase. In general, it makes sense to shift emphasis away from high-ticket items to lower-cost products, to add-ons rather than whole new units, to repair parts rather than replacement parts, and to smaller, more resource-efficient models.
The Obama team's analysis of The American Recovery and Reinvestment Plan projects significant job growth in energy, infrastructure, health care, and education. How does your product line match up with this proposed influx of spending?
5. Recognize your channels' changing needs.
Retaining a customer is significantly less expensive than acquiring a new one. Listen carefully to your sales force and customer service team. Work to remove any perceived obstacles customers might have to doing business with your company.
Channels are being forced in to more house brands. Should you supply and manage their house brands? It may be better to lose the business to yourself than an interloper. Like everyone else, channels are struggling to get by with fewer resources. Their staff has less time to handle new products, training, stocking, and inventory management. Ask yourself: What you can do for them? This may be a great opportunity to become the category manager.
6. Increase value rather than lower prices to remain competitive in the marketplace.
Don't rush to lower prices. Hard-fought price premiums are tough to recapture after sustained periods of price cutting. But customers will be more sensitive than ever to obtaining the best deal. Rather than chopping list prices, investigate temporary promotional pricing and lower volume hurdles for price discounts.
Start by learning your customers' changing needs and adapt your tactics to address the benefits your product offers that meet those needs. Use powerful messages to communicate your product as being a better value than other alternatives.
If your large customers can no longer earn discounts on shipping because they can't afford full truckload purchases, offer them discounted or free freight on a half truckload instead. Increasing value by making small changes in quantity discounts or freight policies could make a big impact in the current economic environment.
Examine your early buy allowances, financing terms, and return policies to see if there are areas of opportunity to motivate distributors to stock your full product line.
The bottom line? Successful marketers must be more sensitive than ever to changing customer needs and competition. The businesses that come out of the recession ahead will have listened very carefully to customers and used laser focus to identify key buyers and provide profitable and relevant products and services.
Michael Barr is a principal at QDI Strategies, a marketing consulting firm.