A man stands in the window of an office building in New York. (Photo by Gary Hershorn/Corbis via ... [+]
Battening down the hatches and sitting tight. When times are tough, that’s what businesses tend to do as they wait for the financial storm to pass. But previous crises have shown that hunkering down or cutting back isn’t necessarily the best approach. Consider those employers that were hasty to shed staff at the start of the pandemic. They were the ones that struggled the most to hire the people they needed when the market picked up again. Sometimes, taking a contrarian approach in a challenging market and pushing forward when others are holding back pays dividends.
Keep On Marketing
When fears of a recession hit, marketing budgets are often the first to go. However, there are opportunities for companies that hold their nerve and continue to invest in promoting their products and services. Investment is the operative word as, when executed effectively, marketing is a driver of long-term business growth – a money-maker rather than a cost to be cut. Research from Analytic Partners backs this up, showing that brands that carry on promoting themselves in uncertain times often thrive. For instance, 60% of brands that increased their media investment during the 2008 recession saw return on investment (ROI) improvements while more than half saw ROI growth in consecutive years. The same research finds that a brand is at risk of losing almost 15% of its business if it reduces or eliminates its marketing spend when a similar-sized competitor doubles theirs. The reality is that customers don’t stop spending in a recessionary market; they may spend less, be more selective, and want different things from brands. In the UK, for example, as the ‘cost of living’ crisis bites, research shows that consumers want to hear reassuring messages from brands. Younger consumers crave motivational messaging, while the over-40s are looking for an injection of humor. The key is understanding what customers want and being creative, not cautious.
Dare To Explore New Opportunities
Growth strategies often go the same way as marketing in times of austerity. The natural inclination is to rein in spending and reduce risk, which means holding off on expansion plans. But as counterintuitive as it seems, a depressed market is often ripe with opportunities for businesses who are prepared to be brave, particularly if the competition is pulling back. It all comes down to careful planning and judgment.
Greater market diversity can also help a business spread its risk by offsetting challenges in existing markets. For IBM, that meant focusing on international growth when the American economy took a nosedive in the Great Recession. It’s a strategy that paid off in my own business. When the UK economy was in turmoil in 2008, Tiger Recruitment expanded into the Middle East, where the downturn wasn’t quite as severe. Tiger subsequently opened an office in Dubai, now one of its largest markets worldwide.
Retain Top Talent
People are another casualty of economic downturns. When cost-cutting is high on the agenda, the knee-jerk reaction is often to reduce headcount. However, while this may save a company money in the short term, it could jeopardize its future success.
Finding high-quality talent is a challenge. Ask any business that has tried to hire staff in the past year. And it has been all the more difficult for those that were quick to lay off staff at the start of the Covid crisis.
Let people go in unsettled times and you’ll undoubtedly struggle to hire when stability returns and everyone clamors for top talent at once. Holding on to talent significantly increases a business’s ability to recover when the market bounces back. Employers who keep employees during an economic downturn may also find staff retention improves significantly. Just think how loyal people will be to a business that provides a safe haven amid uncertainty.
The immediate future may appear to be uncertain, but savvy businesses keep calm and carry on, resisting the temptation to lie low until brighter skies appear. Those brave enough to take risks, who recognize the long-term value of marketing investment and who retain their top talent are much more likely to thrive in an economic downturn, while their cautious competitors stand still. And they are the ones who will be poised for success when better times come around again.
