Recession

I have no idea if we are headed for a recession. There’s an awful lot of talk about it in the media however so now is as good a time as any to talk about how to market during a slowdown (recession or otherwise). The first thing to do is avoid panic. Panic leads to reactionary tactics. This is another one of those things that sounds simple on the surface but turns out to be difficult in practice.

Here’s what normally happens. At some point a competitor, driven by fear, comes up with an offer designed to get the market ‘moving again.’ It could be a straight discount, gift with purchase, financing gimmick, buy one get one, third-party tie-in, etc. They feel intense pressure to ‘do something’ and when no one knows what else to do, price cutting usually emerges as the crowd favorite.

Now there’s nothing inherently wrong with using a special offer to generate sales but when it’s done out of fear it often ends up smelling a lot like desperation. Desperation attracts more of the same. The next thing you know, another competitor copies the idea and offers a discount of their own. And from there the downward spiral begins. Pretty soon everyone is out there trying to one-up each other’s discount offer and the longer you hold out the more you feel like you’re getting left in the dust by your competitors. So eventually you join in and start cheapening your products as well. When everyone is competing on price, the product becomes a commodity and as Warren Buffet says “in a commodity business it’s impossible to be a lot smarter than your dumbest competitor.”

Here’s a little secret. You cannot reverse a market-wide trend with a price cut. Sure, you can create a spike here and there but if you start chipping away at your brand with a series of progressively uglier deals then you are going to regret it later on. So what’s the right thing to do? Get back to the basics.

When things are slow for a long period of time you can count on your competitors to dramatically scale back their marketing efforts. You may have to scale back too but if you are smart you’ll take this opportunity to focus on making your product or service more valuable to your customers and letting them know about it through smart marketing. The businesses that stay in front of their customers during slow times emerge as the leaders when things pick back up. If you take the Ostrich route (stick your head in the sand) you are going to have a hard time making it through the soft period and an even harder time capturing share when things return to normal.

If you feel that it is absolutely necessary to jump in and compete with incentive offers be sure to use it tactically while not deviating from your overall strategy. Don’t make the discount the only compelling reason to buy now. Above all else – don’t try to be the low price leader unless that was your unique position prior to the slowdown anyway.

Slowdowns are not the end of the world. For smart businesses they actually represent an opportunity to capture market share while your competitors hide in a cave. You may have to scale back your budgets but that doesn’t mean you can’t invest more time in lower cost alternatives such as building your blog subscriber base, updating your website, building a profile for your business on a social networking site, starting a podcast, writing an ebook etc. Immerse yourself in making your business remarkable and before you know it, the slow times will have passed.

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~ by stevetriplett on January 30, 2008.

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