During an economic downturn such as the current oil price slump, your brand experiences stress. You may feel pressure to make layoffs, compromise services, jettison product lines or merge with the competition. Despite these challenges, you also gain the opportunity to stretch your investment dollars, engage your employees and capture market share at a time when your competitors are pulling back.
Why is it crucial to protect your brand during a market downturn?
Jonathan Fisher: Down markets tend to stress systems, and the weaker systems break. The added pressure of funding cuts and workforce reductions will exacerbate any misalignment in your brand at the onset of a downturn. Brands need more “TLC” at times like this, not less. And the actions you take now will continue to impact your reputation when the market recovers.
For example, if you need to make layoffs, how will you do so? Are you creating angry stakeholders or are you letting people go with dignity, decent severance and assistance finding new employment? When the market comes back and you’re ready to hire again, careless choices made in a down market will translate into difficulty recruiting and higher costs to win employees back.
Your brand is more than just your marketing: it is important to preserve the people and operations that keep your company culture strong.
Bo Bothe: If you didn’t have a strong brand going into a downturn, you are probably going to find yourself even more challenged. You can protect yourself ahead of time by nurturing and differentiating your brand from the competition and avoiding price-based feeding frenzies. Particularly in a down market, buyers are looking for the confidence that your brand instills and the perception of company health.
JF: The stronger the brand appears, the more likely I am to pick it. I wouldn’t place an order with a company that looks like it will be out of business in a few months – what if my order is only half filled when the company goes under?
BB: Think about where you want to be when the market comes back. Make a plan to come out of the downturn with a stronger brand, better client list and more talented team. Leadership should discuss the skill sets they are looking to add, acquisitions they want to make, and how they plan to increase long-term market share during a down market, and then work towards getting these components in place for when customers are ready to buy in force again.
As you make these decisions, paint a picture for your internal team about where you are headed, and why they should trust and stick with you. Additionally, give your customers a sense for what it will be like to work with your company in the long-term.
What are some of the biggest mistakes that companies make during an economic downturn?
BB: Historically what people do, and it’s also one of the worst things you can do, is to hunker down and circle the wagons. The last thing you want to do in a down market is to disappear off the grid. If you are not actively and openly communicating your strategy to your stakeholders, they will begin looking for information elsewhere. When left to interpret your silence or stories from the media, employees may start to lose confidence or feel frightened about the future of the business.
Stay in touch with customers, even if they pull back on spending. Rather than place additional pressure on them, focus on keeping the relationship healthy. Manage your presence so you appear confident, not desperate.
Sean Burnett: Over time, the industry will either settle into a new normal or prices will go back up and you’ll be ready to hire again. Where will your brand be at that moment?
A common reaction people in the oil industry are having right now, for example, is to cut back on marketing programs to save money. In the long term, however, quitting marketing does not save money. It allows your competitors to win market share and court your clients. Once you forfeit your market presence and cut back on communication with customers, you will have to pay a premium later to win clients back.
In contrast, if you continue to market efficiently, you have the opportunity to win some of your competitors’ business as they pull back.
Of course, we understand managers are still held accountable to maintain profits and commitments to shareholders, despite tightening budgets and other challenges of a downturn. Just be conscious of the long-term costs of your decisions, especially if you are cutting programs or positions you intend to eventually bring back. Many companies unknowingly surrender market share as they scale back on visibility-related efforts.
What adjustments can help your company weather a down market?
JF: If the ability to deliver on your promises has been affected by the reduction of manufacturing lines or other factors, you might need to reset expectations in the marketplace. This can be a great opportunity to rethink your messaging, shift positions or try a different sales approach. Some brands need to extend in a downturn, whether that means adding services to stay competitive or entering a new geographic market because your market went soft.
Additionally, your audience may be shifting. They might not be going to the same events or tradeshows they could once afford, so your outreach efforts may need to test different channels.
If your budget mandates some cuts, focus on keeping the strategies and tactics that have shown measurable ROI for your company. Reconcentrate your investments in these areas and vigorously pursue opportunities in areas that have been proven succesful.
BB: Stick to your core values. We often talk about a concept from Great By Choice by Jim Collins and Morten T. Hansen. Companies with “SMaC recipes” are Specific, Methodical, and Consistent in their approach. When you start with a strong SMaC recipe, you can tweak and refine your methods and communication, without completely abandoning the overall business strategy that made you successful.
JF: Going off that point, if you have a strong mission, vision and values, your people will go the extra mile with you to get through the downturn. If you are expecting employees to pick up additional responsibilities without a pay increase, they need to believe in what they’re doing. A company’s authentic mission, vision and values can offer that reason to work harder and stay longer. Communicate with your employees about how their role contributes to your organization's success. When you focus on making believers out of your employees, the rewards are compounding: employees gain an increased sense of worth and intrinsic job satisfaction, while you benefit from a more engaged workforce.
SB: Communicating your business value to the marketplace becomes even more crucial in a downturn. People will be a lot more selective in a down market and assess their purchases and their partners more carefully.
Downturns and contractions are a healthy part of every economic cycle. If you push through and continue with your marketing and branding strategy, profitability may dip for the short term, but you generally accelerate your company’s growth over time. It’s also more efficient and costs less than collapsing programs only to rebuild them later.
What opportunities can companies take advantage of during a downturn?
JF: In the oil and gas industry for example, companies are particularly sensitive to proof of concept. They want proven products to avoid serving as the guinea pigs. In a down market, however, those same companies reassess their current products and services, opening a window of opportunity for something cheaper, faster or more valuable. If you happen to possess that disruptive, advantageous product, you have greater opportunity to draw attention to yourself.
A downturn can be the perfect time to penetrate new markets, launch new products or try out a new geographic region. When your prospective clients are making money in a bull market, they lack motivation to make a switch or try something new. This is a particularly opportune time for younger, lesser known companies or off-brands that may have great quality products, but rarely get the chance to prove themselves against established competitors.
SB: You have the opportunity to stretch your investment dollars in a down market. In the oil industry, you may be getting pressure from nervous stakeholders to pull back on exploration or other new ventures. However, you shouldn’t make drastic changes to your business model based on a temporary downturn. If you think about the long-term health of your company, you can take strategic steps now to acquire companies or plays at a discount. You can buy low-cost leases, hire inexpensive seismic and stay aggressive in exploration so you are ready to launch strong when the market comes back.
As an acquirer, take the approach that you know this business, and you know what you ultimately need to make your company successful. Everyone watches Warren Buffet in a downturn. He is famous for taking his wallet out when the market goes down. His brand is wisdom and thought leadership, not panicking about insulating his assets.
JF: While other companies are laying off talent, a downturn can be a great opportunity to recruit the best and most experienced hires in your industry. You can pick up talented people who have been let go out of necessity, and you’ll get to keep them when the market rises again. Meanwhile, your competitors will have a slow back-to-market time as they attempt to rehire and retrain their workforce.
Surviving and Thriving in a Down Market
While a downturn may seem to provoke extreme measures and cutbacks, remember that your company’s actions during a market correction or distortion will continue to impact your reputation and operations after the market recovers.
- Focus on choosing a path that will yield positive long-term results rather than short-term relief. Keep a steady hand with branding and visbility efforts in order retain relationships with your customers and seize market share in a substantially less-crowded media sphere.
- Concentrate your communications and operations around your company's core strengths. Down markets tend to surface weaknesses. In order to maintain healthy price points, focus efforts on the arenas where you thrive.
- Investments made during a downturn often carry double the impact - each of your steps forward is amplified in comparison to your competitors’ steps back.
- If you must make lay-offs or other difficult maneuvers such as pay reductions, maintain open and truthful communications about the extent of these measures to help assuage stakeholder fears. Keep in mind that beyond the impact to your recruiting brand, the people you let go will likely go on to work with your competitors or business partners, so keep the exchange as professional as possible.
Resist abandoning the business strategy that made you successful. Instead, make small, but impactful pivots to adjust how you target your audience and position your products or services. Use the downturn as an opportunity to streamline and fortify your business rather than tearing it down to rebuild at a cost later.