Business Success During Tough Times:

Gaining From the Economic Downturn

With many articles having been written about the cause and expected course of the current recession, it is time to look past the theory and focus on real tools and strategies needed to survive the current downturn, and in many cases strengthen to business for greater success both now and in the future.

Such times represent a real opportunity to not only improve your core business but to also improve your competitive position. Naturally, along with strategic opportunities come the inevitable risks, but with a smart course of action, proactive businesses will be able to optimise the opportunities and minimise the risks.

The core of a survival strategy is to:

Tightening cost management to improve cash flow and maintain margins, in spite of revenue downturn
Strengthen the core business – get rid of low profit lines and refocus on higher profit centers for the longer term
Prepare for change
Identify the right long term investments

With economists predicting that the economy will continue to decline until at least the middle of 2009 the downturn is proving to be steep, long and turbulent. Know where you are now – make an objective corporate wide assessment of:

Your product portfolios and development roadmaps
Your technical infrastructure
Your operational efficiency
Your human capital
Your financial liquidity
Your current customer market economy

Each business will be in a different starting position, will be affected in different ways, and to different degrees, so knowing where you stand now is an essential insight.

Critical Assessment

There are three critical questions that need to be answered:

Who will the downturn affect the industry I am in?
What is my current competitive position in the market?
What resources do I have to draw upon – financial, supplier, internal; and how can you best capitalise on these resources to gain competitive edge over your customers?

If your business has a strong financial position then you can take advantage of any strategic and industry positions in a number of ways. You could invest more in marketing to increase customer retention. You could adjust pricing to undermine competitor pricing. There are many marketing tactics a business can use to dominate market niches. You may even consider M&A strategies with weakening competitors.

If you are in a weaker financial position you can divest non-core assets and reduce debt as well as taking aggressive cost reduction measures. Seek partnerships with those whom can provide part of your core service delivery that is non essential to maintain your competitiveness. Focus all your investment on your competitive core strengths. There will be a unique set of tactics each business can deploy in accordance to their own unique business situation.

Price Reduction Strategies

Many businesses make the mistake of aggressive price slashing strategies in such times. Whilst this may help liquidate surplus stock, it also resets the market expectation as to what price one can pay for certain goods and services and forces your competitors to also lower their prices. Each business must identify the cost of sale and support for each customer and approach it from a basis of profitability, not just revenue. In many instances, more customers mean more support costs – where retaining higher margins may mean fewer sales for the same revenue, but it also reduces support costs. Pricing strategies such as price wars generally worsen the market, rather than strengthen it.

Cost Reduction Strategies

As soon as ‘cost reduction’ hits the board room table, the most commonly attacked areas are those which are non-customer facing such as finance, information technology and human resources. Cut in haste-repent at leisure. Across the board cost cutting can be fatal – often eliminating activities essential to driving sales and profits. Most companies can reduce costs from 10-30% without impacting essential spending in those areas that actually provide the products and services that customers value.

In tough times – the sales and support staff are the most critical resources in the business. They are the ones with whom customers interact to make their buying decisions and as such as pivotal in retaining existing customers. Everything hinges on their performance.

Such areas should only be reduced, redesigned or restructured AFTER the core business strategies have been determined. In this way, only non-essential activities are eliminated.

Sales Strategies

The more effective strategy is to make your sales force more effective. Sadly, many companies demotivate their sales forces by withdrawing from sales motivational events and reducing bonuses for targets exceeded. Such companies are short sighted and fail to appreciate that sales people are the first to feel the brunt of a depressed market and as such need more motivation than ever before at such times.

One of the best sales strategies is to employ business intelligence – to ensure that sales efforts are laser targeted to the most profitable targets. This not only increases revenues but decreases the total cost of sale – thereby improving margins. Using a data-driven approach to sales is a sure way to boost the effectiveness of your sales organization, using:

Data Driven Sales Operations - Sales cycles always lengthen in a downturn, however using data-driven sales strategies results in higher win rates. Combined with rigorous management processes and disciplines that systematically channel prospects through the channel to closure will outperform any other sales or marketing strategy.

Targeted offerings – micro-niche marketing can be laser focused down to a market of one single customer. By tailoring your offer to individuals based on the details you have of their lifestyle and buying habits you are more likely to provide them with value they seek and effect a sale. Focus closely on what your market niches are experiencing during these times and how your product or service can assist them.

Performance management – even more amazing than withdrawing sales motivation events, many companies are retaining previously set sales targets for their sales teams. This has an immediate demotivating effect, in spite of any other strategies such as those mentioned above. The most important element to kick off your new sales performance strategies is to maintain motivation in your sales teams. Start by reducing targets, and then as the strategies start to show rewards, targets can be reinstated. By this time, the sales force is building confidence in the use of business intelligence and the new micro-marketing approach. You may also consider rearranging territories to better align with the new strategies. This may also reduce air travel costs. As individual sales persons become familiar with using performance dashboards they will very quickly be able to see what actions produce the best results, and your sales efforts will become optimised. Sales managers will no longer need to waste time on gaining performance updates from sales reps – they can instead better utilise the time talking strategies and helping reps overcome hurdles in the sales process.

Support Strategies

Using business intelligence in support can turn this cost center into a highly effective sales force. With real time information and background analytics, support reps can engage in event-based marketing every time they interact with a customer.

Coming Out on Top

For those companies that have the capability to think fast and make evidence-based decisions, the downturn can represent a valuable opportunitiy to improve their competitive position. During the last recession, many previously top rated companies failed to survive, and others who were seen as less effective rose to the surface, making enormous gains once the economy recovered.

This is a time not to slow performance but to drive corporate performance using business intelligence. This is the lesson and strategy outlined in my recent book ‘The Logical Organization’. Now, more than ever is not a time to make emotion driven decisions or rely on filtered memories of ‘what happened last time’. This recession is very much different from the last on many levels and requires a fresh approach.

Business intelligence is your BEST opportunity for developing a successful master action plan to set a rigorous program to not only survive, but to succeed during this time. BI helps you identify your core business, optimise your marketing, turn customers into loyal referrers and redesign your business ethos to propel you beyond this period into the future with a more agile, more capable and more enjoyable business.

Written by: Gail La Grouw

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