How To Market Your Business In Uncertain Times

How To Market Your Business In Uncertain Times

How To Market Your Business In Uncertain Times 1080 1080 Conversion Marketing

In New Zealand, a nationwide lockdown has begun due to the unprecedented impacts of Covid-19 – something our small country, nor many others for that matter, have ever seen before. Some are calling the Coronavirus the biggest threat to our ‘normal’ way of life since World War II, others are saying this is ‘mother nature’ fighting back. Regardless of belief, these are very uncertain times for everyone.
So considering the above, you may be wondering why we’d be writing an article about marketing and growth in the middle of such a crisis. Two reasons. One, nothing is going to improve if we do nothing about it. And two, you’ve now got all the time in the world to have a cuppa and read this blog.

We’ve pieced together some fantastic insights from American digital marketing institute CXL as well as insights of our own – looking at what others have done historically, and what you can do at present, not only to get through this – but to come out on the other side a winner. ​

What do studies on previous recessions tell us?

Way back when in 2002, consultancy giant McKinsey & Co published a study of 1,000 businesses across the United States covering the early 80’s to late 90’s – including the recession of 1990-91, after the sharemarket crash of ‘87.

The authors looked at what happened during the recession that impacted growth and performance after the fact. Some companies indeed came out winning – this particular study calling them the ‘leaders’.

“While most companies tightened their belts, successful leaders, trading lower short-term profitability for long-term gain, refocused rather than cut spending [. . .] Yet in expansionary periods, successful leaders spent significantly less on [selling, general, and administrative costs] than did their former peers.”

The key point to note being when business is booming, exercising enhanced discipline will see you through the tighter years – and give you flexibility when others, namely your competitors, don’t. If you can get the balance right during tougher years, according to Bain & Co, it can have a large impact on growth when things start picking up again.

Image Source: CXL

“Think of a recession as a sharp curve on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded).”

A similar train of thought, and much closer to home, is laid out in the NZ Institute of Economic Research (NZIER) 2013 report lessons from the recession. They found that business success very much depends on your attitude to business – an old but very true notion. The drawn-out 2008 recession was painful for many, but in the slow economic recovery the highly motivated businesses (calling themselves ‘Business Builders’) were the most successful.

Image Source: NZIER report to MYOB

The ‘Business Builders’ had a clear goal in mind: to grow their business. They were doing more of everything, from customer acquisition to product diversification. Five keys to success emerged from this group, which included:

  1. Retaining and growing their customer base – market share went to those who looked after their customers, allowing them to acquire those who were not being looked after
  2. Marketing effectively – consistent with the above strategy
  3. Investing in their business – such as a good CRM system, providing​ greater insights into customer behaviour and market segmentation (we’ll touch on this later)
  4. Investing in staff – hiring more people and paying them more, particularly those after part time or casual work given the uncertainty of future economic positions (provides flexibility in future)
  5. Getting the basics right – in particular, prices and margins and ensuring their product mix met customer needs

A larger study by the Harvard Business Review (HBR) looked at 4,700 public companies in the three years before, during and after a recession hit. The way these businesses reacted got categorised into one of the four P’s (ironically a little different to those taught in marketing 101). Keep in mind each company was benchmarked against their peers or competitors in order to determine what category they fell into.

  1. Prevention – focused on cost cutting, potentially lowering the quality of their product and harming customer satisfaction
  2. Promotion – ignored what was going on around them, increasing expenditure and adding more features when people wanted more value
  3. Pragmatic – a careless combination of prevention and promotion, including relying on laying off their staff
  4. Progressive – a balanced approach to prevention and promotion through evaluating their entire business model, cutting costs in the short term i.e. now and when demand went back to what they considered normal (unlike laying off employees which has only long term ramifications)

The HBR study explains this further by contrasting two large office supply & retail firms during the recession in 2000:

“Office Depot cut 6% of its workforce, but it couldn’t reduce operating costs significantly. Although the company created an incentive plan to boost sales, its sales growth fell from 19% before the recession to 8% after—five percentage points below Staples’ post recession sales growth rate.

By contrast, Staples closed down some underperforming facilities but increased its workforce by 10% during the recession, mainly to support the high-end product categories and services it introduced. At the same time, the company contained its operating costs and came out of the recession stronger, bigger, and more profitable than it had been in 1999.”

The findings by the HBR authors were clear.

“Firms that cut costs faster and deeper than rivals don’t necessarily flourish. They have the lowest probability—21%—of pulling ahead of the competition when times get better.”

Image Source: CXL

In a small country such as ours, many businesses, especially SME’s, don’t have the funds or support to prepare themselves for recovery during a crisis – especially one of this magnitude. We are very lucky however that the NZ Government has announced support packages for businesses, homeowners and the like with more announcements set to come. Other countries aren’t as lucky.

If you’re able to get that support, it’s evident that trying with all your might to avoid going into ‘survival mode’ i.e. making large cuts and reacting defensively will fast track business growth when this is all over – especially considering this looming downturn has not been caused by the banking sector in the first place.

However, we know what you’re thinking… the unfortunate reality is this all comes down to cash in hand. If that’s dried up, it’s hard to see where the next drop will come from – a real catch-22 scenario, as if you don’t market yourself, that halt in revenue will go on for longer. As the Bain & Co study found, businesses ended up spending more than they’d saved to recover from their absence in the marketplace. Therefore it goes without saying – keeping your brand front of mind has never been more important, but the question is – how?

Know your customer and understand their new behaviours

It’s scary to think that when the lockdown and overall effects of Covid-19 have passed, and the world starts ‘going back to normal’ – that ‘normal’ will actually no longer be the same. Which means, neither will your customers behaviours and attitudes. In the grand scheme of things, this is a giant shift in a short space of time (we hope).

An optimised digital strategy will have even more weight now that people are going into stages of self-isolation. Your customers will be using what they have access to (the internet) to find the resources they want and need. Every space that a business is present online should be operating as a part of that funnel.

So with that in mind, analyse data in Google Analytics now more than ever. Take advantage of Conversion Rate Optimisation tools. Use data from different sources and build a comprehensive, data-driven map of how your customers have changed and how you can react accordingly.

Customer segmentation will be key. However you may have to change how you segment your buyers according to the HBR and CXL:

“Marketers typically segment according to demographics (“over 40,” say, or “new parent” or “middle income”) or lifestyle (“traditionalist” or “going green”). In a recession, such segmentations may be less relevant than a psychological segmentation that takes into consideration consumers’ emotional reactions to the economic environment.”

Segmenting buyers psychologically means you can categorise them into four key groups:

  1. Slam-on-the-brakes – segment that is hit the hardest, meaning they may reduce, delay, or stop spending altogether. It includes low-income consumers and high-anxiety buyers (from any income bracket).
  2. Pained-but-patient – those with short-term anxiety but believe things will be okay in the long-run – usually the biggest segment. Buyers look to save money in all areas. More bad news may push them into the slam-on-the-brakes segment. (Considering the dynamic nature of Covid-19, this will be an important segment to keep an eye on).
  3. Comfortably well-off – this group will keep purchasing at almost the same amount as usual, but may be picky about some things – usually well-off buyers.
  4. Live-for-today – primarily the younger generation in metropolitan areas – they care about experiences rather than material goods. Not too bothered about saving money and tend to delay buying major assets and purchases.

And depending on what attitudes these segments have will in turn have ramifications for different product types:​

Image Source: CXL

When new segments are emerging and old ones are changing, what marketing strategy should you adopt?

According to the HBR, each segment has options:

  • “Prospects are reasonably good for value-brand essentials sold to slam-on-the-brakes consumers, who will forgo premium brands in favor of lower prices.”
  • “Value brands can also effectively reach out to pained-but-patient consumers who previously bought higher-end brands, a strategy Wal-Mart aggressively used with its ‘everyday low prices’ policy in the 2001 recession.”
  • “Repair services can market to the pained-but-patient group, who will try to prolong the life of a refrigerator rather than buy a new one.”
  • “Premium-brand market leaders [. . .] can introduce a ‘fighter brand,’ a lower-priced version of the premium offering sold under a different name and backed by minimal advertising.”
  • “Restaurants and other businesses often configure offerings by using key retail price points proven to resonate with customers, as with the 99-cent burger or the $399 dishwasher.”

Image Source: CXL

New or unusual pricing strategies can also assist a variety of businesses:

  • “Results-based pricing, a concept pioneered by consulting firms that links payment to  measurable customer benefits resulting from use of a product or service”
  • “Changes in the pricing basis that would allow a customer to, for example, rent equipment by the hour rather than by the day”
  • “Subscription pricing, by which a customer purchases use of a product—say, a machine tool—rather than the product itself”
  • “Unbundling of a service so that customers pay separately for different elements of what was previously an all-in-one package, as airlines have done with checked baggage and in-flight meals and entertainment.”

If you are looking to make dramatic changes to your business such as reinventing your pricing model, history tells us that recessions can actually create opportunities for radical change:

“When survival is at stake, it is easier to get companywide buy-in for revising marketing strategies and reallocating investments. Managers can defy old mind-sets and creatively search for superior solutions.”

Regardless of the strategy chosen, it’s sure to help – now and once this is all over – if the choices you are making have a core goal in mind: to strengthen your brand.

Think about the ‘mere exposure effect’. Consumers tend to favour brands that they are familiar with. There are many competitors who have not stopped advertising (so far) during Covid-19. And while we are all stuck at home, we will most likely be ‘window shopping’ online, therefore it’s a good opportunity to be present so consumers are familiar with your brand once they are ready to convert. The conversion impact won’t happen straight away as it takes time to build brand familiarity, but it will come.

Building your brands’ trust and credibility during this uncertain time should also be top of mind. It may in fact be a time to stop selling (especially considering we can now only shop online for essentials during the lockdown) and instead build engagement and a sense of community with your customers. Now more than ever people need businesses they can trust and a thoughtful, caring social media presence could be a massive help, which in turn assists the mere exposure effect mentioned above.

Conclusion

Churn this thought over for a bit.

Good marketing shouldn’t cost you money, it should make you money. If marketing is done strategically, and well, it should not only pay for itself but be profitable.

It is not an expense, it is an investment. And with digital marketing, it’s often not a long term investment but rather one you can see a positive, measurable return on in the short term, sometimes even immediately.

In times of crisis, especially one such as this, use all of the tools you have available to you and optimise, optimise, optimise – the data doesn’t lie.

Balancing costs and investments, organisational flexibility and security will be tough. Understanding changing customer behaviour and attitudes now more than ever will help drastically. And remaining positive, that we will all get through this, is critical. Lastly, invest in your brand and make sure Kiwis remember your business for the right reasons.

Take care New Zealand, we can do this.