To put it mildly, things are unsettling right now. Many experts warned of the inevitability of an economic downturn. However, no one predicted human tragedy —in the form of a global pandemic — would kick it off. According to the Harvard Business Review, the natural psychological responses range from over-optimistic investing to extreme cost cutting.
We’ve looked at the companies that thrived during past recessions and offer an alternative path. It’s time to fight our instincts and take strategic action.
1. Don’t Simply Cut, Invest Smartly
Gartner wrote, “Modern winners of economic downturns do not simply cut costs to weather the storm: While hundreds of thousands of companies existed during the previous moments of crises, a select few companies — just 60 of the largest 1,200 global companies in the U.S. and Europe — ended up as winners. Winners in the last recession reacted quickly and were ready to invest when others were not.”
Evaluating expenses to eliminate waste while simultaneously investing in growth is a sound strategy backed by multiple researchers and business strategy experts.
In a 2010 study comparing 4,700 companies spanning three economic recessions, researchers at Harvard found company responses to an economic downturn fit into one of four categories:
- Prevention-focused response – avoiding loss and minimizing risk
- Promotion-focused response – purely offensive strategy (such as making large investments while prices are down)
- Pragmatic response – a combination of defense and offense
- Progressive – an ideal calibration of both defense and offense
Prevention-focused responses overcorrect for market instability by slashing expenses indiscriminately. Promotion-focused responses tended to encourage a culture of over-optimism, resulting in personnel ignoring warning signs that should have been heeded. Companies that deployed a progressive strategy reported twice the earnings of both prevention-focused and promotion-focused companies.
Progressive companies assessed tactics to discern what was or was not working and shifted investments accordingly. These companies cut costs by increasing operational efficiencies while continuing to invest in R&D, new assets, and marketing.
In a study that nearly mirrored Harvard’s findings, Bain & Company released a study in 2019 stating the most successful companies in a recession restructured costs and practiced financial discipline while making strategic investments.
Bain & Company found successful growth companies “invested substantially in R&D instead of dialing back. They pointed sales teams to top priorities among accounts and prospects, as determined by the account’s all-in profitability and potential lifetime value. They realigned distribution by rebalancing the mix of current and new locations, or next-generation formats. They also maintained marketing while competitors cut back. And they focused on improving the customer experience, making it more simple and personalized through investments in digital capabilities.”
2. Now is the Time to (Really) Align
How companies respond to employee safety concerns, embrace remote work, aid the community, and adjust tactics to reflect both empathy and an understanding of how the market is changing will dictate their long-term success.
“Companies with the strongest stakeholder and partner orientations are best able to survive and transcend crises, because they can plan together, gain local knowledge from each other, and draw on good will to get back to business quickly when the crisis abates,” says Rosabeth Moss Kanter, Professor of Business Administration at Harvard Business School.
Now is not the time to operate in a silo, which is a habit many sales and marketing personnel will need to break.
In our 2020 State of Revenue Marketing and Compensation Report, we found that 20% of marketers in organizations with more than 100 employees were “Not Aligned” with sales and the majority were only “Somewhat Aligned.” Less than half of marketers were in organizations with clearly defined funnel stages. Unsurprisingly, ineffective sales and marketing alignment was selected as a top threat to goal attainment.
It’s natural for salespeople to be concerned about the short term impact of prospects reactively cutting spending, eliminating participation in in-person events, and putting decisions on hold due to the uncertainty introduced with COVID-19 and the resulting market downturn. Marketers will need to compensate for lost opportunities from events and pivot their messaging for this new reality.
Somehow, sales and marketing need to figure out how to balance short term sales concerns with finding a long term strategy that works. Historically, this has meant deepening existing customer relationships while investing in new ways to capture more market share.
McKinsey researchers warned, “Some companies are pursuing their coronavirus responses strictly within organizational silos (for example, the procurement team is driving supply-chain efforts, sales and marketing teams are working on customer communications, and so on). But these teams have different assumptions and tend to get highly tactical, going deep in their own particular patch of weeds rather than thinking about what other parts of the company are doing—or about what might come next.”
If there was ever a time for leadership to unite and encourage personnel to overcome the rift between sales and marketing, it’s now.
3. Double-Down On High ROI Marketing Efforts
Do you remember the expression “measure twice, cut once”?
The most successful companies during an economic downturn invest in marketing and they do it wisely. Tech CEOs that led their companies to win in the turns of the past invested in novel solutions, eliminated unnecessary costs early and doubled down on high ROI marketing efforts while using cash to make opportunistic purchases.
Continuing to operate against last year’s business plan will not work. The key to success is measuring output, in real time, and rerouting ineffective investments as quickly as possible to maximize output.
According to researchers at Harvard who studied companies after the 2008 downturn, “In deciding which marketing tactics to employ, it’s critical to track how customers are reassessing priorities, reallocating budgets, switching among brands and product categories, and redefining value.” This necessitates investing in both market research and internal analytics.
In other words, it’s not possible to invest in the right tactics without knowing what they are.
As Alex Price said, “Obvious maybe, but those with strong data and able to draw actionable insights from the last few months will be well prepared for the next few months.”
In a recent CaliberMind Revenue Report podcast featuring Erik Eaton, he found replacing subjectivity with data not only aids in determining a campaign’s success. Removing ambiguity also helps marketing gain the credibility needed to successfully lobby for their desired marketing budget and experiment with new marketing tactics efficiently. This is particularly critical when business leaders are also susceptible to the panic bug.
In our 2020 State of Revenue Marketing and Compensation Report, we found that 41% of marketers admit they can’t measure ROI. This must be fixed.
4. Apply the 80/20 Rule to Your Marketing
The coronavirus has had some obvious impacts on marketing, with many less obvious symptoms manifesting as marketers’ knee-jerk corrections prove to be less than effective. An example Mark Schaeffer pointed out: if what you are presenting is not absolutely relevant to our panic-stricken world, your online replacement for XYZ event is going to be lost in the sudden swell of online classes, webinars, and virtual conferences.
In the coming months, marketers need to hit the perfect balance of caution and creativity.
Fortunately, some organizations already follow a blueprint that helps them spend money where it works while reserving funds for experimentation.
Adam Smith, Digital Marketing Manager at IMPLAN, follows the 80/20 rule and outlines it in Episode 13 of the Revenue Marketing Report.
“The 80/20 in terms of budget is let’s spend 20% of our actual ad spend on these experiments, see what has some growth, and then we’ll fold that into the 80% [we know] works.”
As they find new audiences and novel ways to engage them, they apply their learnings to existing campaigns and incorporate proven experimental campaigns into their recurring plan. The lessons they gather from the 20% they spend on experiments are what keeps the other 80% successful.
This method doesn’t come without a cost. Adam says, “80% of our time will be spent on the innovation or planning or strategy or creating content for these new experiments or campaigns we want to run. Whereas, 20% will be on, like I said, our day to day, tweaking the keywords or finding new audiences or just trimming up what’s already there.”
Proven campaigns should be (templatized) to make them easy to plug and play as needed, leaving more time to explore innovative ways to navigate this market.
Putting a “Give First” Mentality to Work
Many people are experiencing monumental changes in how they socialize. Concerts have been canceled, sporting events no longer allow crowds, and restaurants have reduced service to take out or delivery. Some communities have even instituted a “shelter in place” policy.
In response, free services have sprung up to keep at-risk people stocked up on medications and groceries. Virtual book clubs have been organized to give people something to talk about other than COVID-19. People are still finding ways to create and inspire hope. In dark times, communities find a way to band together even when they can’t physically congregate. This is humanity’s greatest strength.
At CaliberMind, we believe this is the time to lean in — not only in terms of business strategy but how we share our resources with the marketing community. These are some of the things we’re doing to help:
1. The MasterOps Community
The MasterOps Mission is to give marketing ops a vibrant community they can lean into. It’s a hard job in the best of times, and you shouldn’t have to go it alone.
We’re revamping our virtual event strategy and will offer small break-out sessions to innovate ways to tackle a specific challenge. Lessons learned will be shared with the community. We’re also hosting office hours, moderated by members of the MasterOps community.
2. Always Putting Our Customers First
We want to ensure our customers are successful, so we’re kicking off office hours to help our clients stay on top of their data and the latest strategies that show promise. Ask us anything — how to get better insights from a report, what’s the best practice on MQL/A conversions, how to get the most out of your tech stack — and we’ll have a team ready to help.
3. A Program For Marketers Who Need Better Insights
Real-time insights are more vital than ever. We want to help companies that don’t have visibility into marketing ROI, but are having a hard time getting immediate budget for it and are concerned their teams don’t have the time and resources to manage an implementation. Send me a direct message and I’ll share how we can help mitigate this, but still get you the insights into where you should be doubling down.
Resources For Further Insights
Forbes: Recession-Proof Businesses
Bain & Company: Beyond the Downturn: Recession Strategies to Take the Lead
HBR: How to Market in a Downturn (reallocate marketing, don’t slash)
HBR: How the Coronavirus Is Already Rewriting the Future of Business
McKinsey: COVID-19: Implications for Business
Alex Price: B2B marketing through an uncertain time
Mark Schaefer: 7 non-obvious Implications for marketing
And as always, feel free to send me a note with questions or comments. My office is open.