There’s no denying the last 2 years have been extremely difficult time for both individuals and corporations. Companies have scaled back their marketing strategy in an effort to save money. Lean organizations have turned to new marketing strategies, such as social media, to help them do more with their reduced resources.
What are some of the lessons to be learned from organizations who thrived (or failed) in the economic crisis?
Lesson 1. Stay customer focused.
Firms lost sight of their customers in the period pre-economic crisis. I was teaching MBA students working in management for many of the premier organizations in the US — such as GE, Proctor and Gamble, Johnson and Johnson, Toyota… and they had little appreciation for customers.
I can’t vouch for what their leadership were doing, but the message reaching middle managers, who operate where the rubber meets the road, was the numbers matter, not customers. And the numbers that mattered were ROI oriented and focused on creating shareholder wealth. In fact, many thought I was crazy (and told me so frequently) because I preached a customer focus.
Today, many corporations are lamenting this strategy. Jack Welsh, former Chairman of GE, recently stated that an overemphasis on metrics assessing short term shareholder wealth was
On the face of it, shareholder value is the dumbest idea in the world
New research suggests companies need a customer focus more than than ever before.
Customer focus needs to be an integral part of your marketing strategy. Customer focus means going beyond measuring how customers spend their money to understanding WHY they spend their money. With lots of competitors out there making lots of products vying for customers’ dollars, increasingly share of wallet goes not to companies who provide the best value propositions but to companies whose values mirror those of their customers.
While it might seem complex to understand what customers value, its really simple. Customers value family, they value the environment, customers value integrity, customers value honesty, customers value sincerity, customers value innovativeness, ingenuity, and creativity, customers value companies who give back to their communities. In the past, when marketers looked at customer values what they found was a very inward focused set of values, the economic crisis has developed an outward focus among many consumers — which is probably a good thing.
Lesson 2. The nature of competition has changed.
Porter’s Five Forces Model of competition was developed before the economic crisis, but the economic crisis has reinforced the plethora of competitors faced by companies.
The economic crisis has heightened competition from other countries, especially China, which was virtually unscathed by the economic meltdown.
The economic crisis has also emphasized the need for competitive advantage. Competitive advantage was always important, but in the current economic climate, where competitors are cutting marketing expenses and R&D, the opportunity to capture competitive advantage is alluring.
One of my favorite quotes, although I can’t remember who said it is:
No one ever shrank to greatness.
That’s especially true in this economic crisis. Firms cutting expenses too carelessly are leaving themselves open to attack and weakening their chances of recovery when the economy turns around. Marketing strategy should focus on leverage rather than reduce.
Lesson 3. Don’t lose your employees.
Another bad area to cut costs is among employees. Losing valuable talent at this stage, when they are relatively inexpensive, is both costly today in terms of limiting your ability to implement successful marketing strategy, and in the future when you’ll pay a lot more to attract talent away from competitors.
Settling for mediocre employees means you’re not achieving optimal customer service (lowing customer satisfaction and brand image), your not creating innovative products and ideas, and you’re not building, but demolishing.
I know what you’re saying, how am I supposed to implement these suggestions. My sales are down, I can’t borrow money with the tight credit marketing, IPO’s are an extremely bad idea in this economy, so where does the money come from to do what you’re suggesting.
1. Are you truly lean? A lot of money can be saved in most organizations, even ones who think they’re running lean. Look at your mission and cut out anything that doesn’t mesh with your mission statement. Reevaluate your long-term strategy and cut things that don’t get you where you want to be in 5 years. Reduce perks for upper management and instead make them performance based.
2. Borrow from employees. They have a vested interest in the success of your business. Instead of raises, give them profit sharing (serious profit sharing, not a token at the end) and tie shares to performance, not seniority. Sell employees stock to raise funds.
3. Work with suppliers to reduce costs through supply chain strategies such as single-sourcing, logistic efficiency, economic order quantities, etc.