Is the economy slowing down? Is the commander-in-tweet stirring the proverbial pot? Is HGTV skewing the real-estate market again? These are all factors to consider when preparing for the next recession.
Here are 7 Steps to Being Recession Ready in 2019
#1 Be Prepared
It is important to start planning now for a potential recession because timing is key to lessoning the impact of a recession on your company. Time is the enemy. Planning can take anywhere from 1 to 6 months, depending on the size of the organization. By having a plan in place now, if and when the recession hits you will be prepared and will not have to react to the recession but execute your plan.
- Economic indicators (Stock Market, Unemployment & Housing Market) are slowing down now, start preparing.
- Evaluate your marketing channels – optimize your best performers, sunset underachievers.
- How will you defend keeping headcount? How will you support keeping your marketing budget when the first mandate coming your way is to cut spending?
#2 Engage the Sales Team
Sales is always key but especially critical in a recession. The sales team needs to utilize their existing tool box, marketing automation, email marketing, speaking engagements, etc. and be more diligent with their prospecting. Nurturing existing clients for incremental sales is key as well as creating new products or services in the recession that keep those clients around.
Other considerations – Align Sales and Marketing
- Work together, not in silos.
- Combine sales and marketing efforts to create a single revenue pipeline.
- Separation and infighting create vulnerability to layoffs and additional budget cuts.
#3 Manage Upwards
Owners and the C-Suite may overlook many things in a recession but cutting costs will be their first objective. Do you have your plan B ready? Will your marketing budget and team survive?
- Brands that increase advertising spending during a recession, when competitors cut back, can improve market share.
- Your customers need reassurance that your brand is still around and a viable option. Don’t go dark.
- Be careful what you cut. If you planned ahead you know which marketing channels are working and which are not. This will allow you to make cuts, but on your terms, not the CFOs.
#4 Cut the Right Costs
The first places business owners should look to cut costs is with reoccurring service or technology fees that are not being used by the company. Auditing software, tools and those reoccurring costs can reduce the bottom line without impacting the business or customers. Are all software licenses being utilized, are all software subscriptions being used, etc.
Tips from previous recessions:
- Companies that cut manufacturing and administrative costs do well in a recession.
- Companies that cut marketing or reduce product quality underperform in a recession.
- Cutting ad spend will reduce your income. Research shows cutting ad spend sees sales and income fall 20 – 30% over the next two years.
- Cutting ad spend causes damage that lasts longer than a typical recession.
- Cutting ad spend puts brand at risk and could lead to product and service price cuts that impact profit margin
#5 Turn to Technology
Investing in technology is not a foolproof method for avoiding the impact of a recession but it can soften the blow. For instance, instead of having a call center, can an AI chat bot on your website facilitate a customer experience or purchase in the same manner? If so, that technology can improve customer satisfaction and reduce overall operating costs. Technology should always be evaluated but if you are more than two generations behind on a technology upgrade when a recession hits, you may find it more expensive to service your business or clients in the same manner.
- Do you use marketing automation? How do you manage your lead flow? Do you really need that expensive marketing automation platform?
- Salesforce and Marketo, among others, are expensive platforms, consider migrating to more cost-effective solutions that deliver same functionality at a reasonable price.
- Evaluate AI technology to assist in customer service or improve the sales cycle
- Ensure all marketing efforts are measurable, build out data reports using Google Data Studio
- Cutting that traditional marketing budget in favor of measurable digital marketing may make you a hero.
#6 Ease Fear
When a recession hits the immediate fear if the impact on employment. Communicate with your employees to let them know what cost saving plans you have in place before layoffs become a reality. If you believe in the people you hired, they will perform for you if you ensure their job safety. If their job is uncertain then performance will drop and have a greater negative impact on your company. Be transparent in the conversations. Sometimes people will be more willing to take a temporary pay cut over unemployment.
#7 Deliver Value vs. Cutting Price
In 2008 and 2009 consumers cut their spending to Maslow’s Hierarchy of needs – food, water and shelter. Homelessness spiked during this time so those are the bills people pay first. The bills that are avoided are the ‘extras’ – the monthly Stitch Fix box, Comcast cable, gym memberships and other items not necessary for everyday life.
Instead of looking to cut price, in 2009 Netflix changed their delivery system to provide value to their customers and drive membership. During the last recession, Netflix gained 3 million members. This was due to their new tv/movie streaming plan, which allowed subscribers to stream an unlimited amount of entertainment a month, along with their disc-delivery service.
By adding a variety of price plans and different services, Netflix became notable for what they did, the value they delivered, their customer service, and eventually brand recognition. As of today, Netflix continue to grow with over 117 million subscribers.