- During an economic downturn, it can be tempting to push ahead or cut marketing costs.
- Losing new business due to lack of marketing and having to lay off experienced employees to rehire them is not the best course of action.
- Focus on messages that resonate with customers and don't reduce your marketing spend.
Last year, the US recorded the highest inflation rate since 1981 – 8.5% in July – shocking US consumers and stalling the economy. In addition, the US Bureau of Labor Statistics reported a 4.5% increase in labor costs last year, which helped workers keep pace with inflation but left small businesses in dire straits, losing profits and growth.
As business owners struggle with rising prices for goods and services, falling U.S. costs, and rising labor costs, the question of how to sell effectively during a recession has become increasingly important.
Since starting my Postcard Mania business in 1998, I've faced many different challenges, including building my own direct mail toolkit and breaking away from the competition. I've also survived two recessions; Each of them brings different results to my company.
Today, I share what I learned during this recession with anyone who wants to build a strong company that can withstand any challenge. I'm happy to report that Postcard Mania grew last year despite a bad economy, with annual sales up 15% and hiring up 7%.
These life lessons boil down to three basic principles to follow during a recession. These principles are supported by extensive research on the subject, which I will present below.
1. Maintain (or improve) your marketing.
If there's one thing I can take away from this article, it's this.
I saw it firsthand during the recession of 2008. At that time, 46% of our revenue came from mortgages and real estate. When the housing market crashed, we lost thousands of customers and our revenue immediately plummeted. For the first time in the history of my company, we were not growing; In fact, we moved in together – quickly.
In the year In 2009, our situation looked dire. I didn't want to fire anyone, so my mentor suggested we cut our marketing budget and send out a few postcards each week. So I listened and finally regretted it.
Our sales were down 15%—a seven-figure loss—and we had a lot of prospects, which prevented us from getting back on our feet. So I cut my salary drastically, corrected my mistake, and increased my marketing spending to pre-crash levels. I also invested a large portion of my marketing budget in other industries (besides real estate) that we purchased.
Fortunately, once I made an improvement in our revenue, our numbers quickly recovered and 2010 turned out to be our most profitable new year to date.
When the 2020 pandemic hit, I didn't want to make the same mistake. I am opposed to reducing transaction costs.
First, our average weekly sales dropped 41 percent from mid-March to the end of May. We use it to fund our savings and pay salaries. But as we remained strong, July 2020 was a new month with high revenue for us. Still, the decision to continue trading has paid off.
Since 2020, my company's sales have grown by an average of 17.5% per year. Previously, between 2009 and 2019, our average annual sales growth was only 4.6% – a huge difference!
I share this with everyone because staying in the market is one of the best lessons I've learned as a business owner. But you don't just have to take my word for it—there's also extensive research that backs up my experiences.
A study by McGraw-Hill analyzed 600 companies from 1980 to 1985 and concluded that companies that chose to maintain or increase their advertising levels during a recession had higher sales after the economy recovered. Companies that marketed during the recession not only performed better in the long run, but had 256 percent higher post-recession sales than companies that did not survive the market.
I know firsthand that it's hard to raise money when you're in trouble, but think about how much effort you'll have to recoup your losses because you've stopped finding potential investors.
The best option is to find smarter ways to improve the marketing of your products and services, rather than stopping marketing altogether.
2. Find ways to reduce costs and increase efficiency
You have to be smart enough to weather the economic storms and stay strong. Analyze all areas of the business and find ways to reduce costs, increase efficiency and ensure marketing consistency.
The key is to find the right balance between cost reduction, smart investment and marketing to gain market share and increase profit margins. The Harvard Business Review studied effective business strategies during three different global recessions and divided the 4,700 companies they studied into four different categories : prevention-oriented , support-oriented , pragmatic and progressive .
Prevention-oriented companies prioritize preventive measures and think more about avoiding losses and reducing risks. Examples include mass reduction, cost reduction, marketing reduction, and expansion. Companies that focus on advertising spend huge amounts of money on advertising to stay ahead of their competitors and promote them. On the other hand, pragmatic and progressive companies combine attack and defense.
The researchers found that progressive companies hit the sweet spot and entered the market despite slightly lower costs. As a result, they outperform their competitors by 10% or more after their decline by 32%. Progressive also outperformed real companies by 4% in revenue and over 3% in profit, outperforming the group overall by a factor of two.
It takes some time to analyze your work to find areas of change, but here are some to get you started:
- Avoid unnecessary expenses
- Review payment terms or prices with suppliers
- Consider telecommuting to save on office costs
- Research your product or service to see if you can provide an inexpensive entry point.
- Save energy by reducing consumption or changing the work environment
- Reduce business travel
- Automate certain processes to save employees time on certain tasks.
I've said that I'm not willing to stop shopping during the pandemic because I learned years ago. Another hill I'm willing to die for is not firing, which is a common first step many companies take to save money.
I'm not saying "never quit" because only you can decide what makes sense for your business. My suggestion is to find other ways to save money before you fire a team member who is trained and experienced in your field.
Since I'm not laying off my staff in 2020, we won't need to hire and train new talent after we open for business. Postcard Mania is designed to reach customers while other companies are putting their employees back on track. First, avoid this obstacle by doing everything you can to retain your employees.
3. Review your message and adjust if necessary
My final tip on how to sell effectively when the market is down is to spend more time crafting the right message for your audience. In times of crisis, many families are forced to survive as the price of basic necessities such as eggs and milk drop, and they must save elsewhere to make up for it. The worst thing you can do is offend them, so make your message relevant to their needs.
For example, LG Electronics' slogan was "Life is beautiful" but they didn't use it in their marketing during the 2008 recession because they didn't feel disconnected with their target audience members. fight
Many people spend less during a recession, but do so out of necessity or a desire to escape stressful situations. This means your customers are becoming more selective in their purchases and need the right incentives to move.
For example, a gym membership may seem like a luxury during tough times, but it will be easier if you reiterate your mission that exercise can help families cope with stress and stay healthy and happy.
With that in mind, not everyone gets crushed when the economy crashes. There will always be people who can buy your product or service, so pay attention to their needs as well. The key is to know your audience well and talk to them as if you were in their shoes. The more trustworthy you are in your marketing, the more trusting and loyal customers you will remain, whether their wallets are thin or thick.
Applying these three principles has caused my company to experience some of the worst failures in the past two decades. However, the best way to learn is to do it, and over the years I have tried different training methods with varying results. Don't be afraid to try different strategies during a recession. The experience gained is invaluable.
Joy Gendusa is the founder and CEO of Postcard Mania.