World Business

As counterintuitive in the same proportion that it force seem, eschew discounting. Our columnist offers advice on positioning your company to survive and thrive

through Steve McKee

Watch original video:

Unpredictable. Slow. Bleak. Grim. Gloomy. All words that have been used to represent the economic outlook for the balance of 2008—and depending upon who you talk to, the scenario for 2009 and beyond. Standard & Poor’s believes the economic difficulties we’ve been experiencing due to the mortgage mess and skyrocketing oil prices will be at their worst early nearest year (BusinessWeek.com, 6/13/08). And while the housing market is trustworthy to recover, oil prices may never draw near remote prostrate. That means more tough times in quest of the economy, both in the U.S. and globally.

What’s a responsible business leader to do? Perhaps the slowdown already has made an collision on your fellowship. Or maybe you can see it coming but aren’t abiding exactly when and how it will hit. In one or the other sheathe, the most important thing is to keep your wits about you and not succumb to five common mistakes companies often make when state of things commit to memory tough.

1. Be pungent and thrifty, but don’t panic. This, too, shall pass.

Economies get along with you through cycles of opening and contraction. It’s what we entirely knowing in college economics courses (on the frontier then, of way, we weren’t really paying attention). The trouble is, while academics be possible to pontificate on the cyclical economy, real business the bulk of mankind have to be supported through difficult economic events. We love the expansionary times, but the contractions can be painful. If you’re smart, you’ve managed your equalizing agency sheet well and can ride out a period of slow or not any growth. If not, you may have to make some cuts. Just be careful to trim profitable and avoid cutting muscle as much as possible.

2. Marketing is muscle, not fat. Be careful about cutting it.

Just as the savviest investors contemplate down markets as a time to buy when everybody else is selling, the savviest marketers know recessions are a great time to pick up market share. They understand that by maintaining their budgets (or even increasing them) they may not come wanting ahead during the down times, only they can pick up market share that will pay off in the long run. Marketing dollars in a recession are of a piece oxygen upon the body Mt. Everest—the less there is in the surrounding environment, the more valuable the whole you possess becomes. Cutting your marketing spending is a sure way to give ground to competitors who may be more aggressive during the downturn.

3. Don’t be deprived of focus by chasing business you wouldn’t normally want.

When clients and customers get nervous with respect to the economy, they cut back their spending. For you that could mean fewer transactions, smaller purchases, or as luck may have it the couple. But if you try to broaden your core crops or service seek reference of the case to satisfy a wider audience, chances are you’ll make ready up your best customers even less satisfied, giving them one more reason to stay home or spend less. There’s a reason you don’t pursue certain types of customers when periods are good, and that reason probably hasn’t changed. Do your most excellent to stick to your knitting and augment the value you contribute to your beyond all others customers. They may decide to make their cutbacks in areas other than yours.

4. Don’t discount.

It’s easy to rationalize discounting for the period of a downturn, for your collection’s sake ("it helps to drive business") during the time that well as as antidote to the sake of your customers ("they’re struggling and need the help"). But whether times are good or bad, discounting your price discounts your product (BusinessWeek.com, 4/14/08) in the eyes of your customers. There was a time in the 1990s whereas McDonald’s (MCD) and Burger King (BKC) put their Big Macs and Whoppers on sale so often that they educated their customers none to pay full price. That created a margin problem from which it took them years to recover. If you need to make your products else affordable (to generate volume, goodwill, or both), do so carefully and deliberately. But lower the price in place of offering a discount.

5. Don’t neglect the elephant in the room.

We live in a 24-hour information cycle. When news breaks, people know it, and housekeeping news breaks every day. You don’t have to be an economist to understand the business environment isn’t in the most profitably shape right now, and the point is brought household to your people in a corporal way every time they go to the grocer’s shop store or fill up their elastic fluid tanks. Even if your company’s revenues have held up, your employees know there’s trouble afoot and they’re nervous. Make assured they know you’re on top of things and have a plan.

There’s no powerful what lies ahead over the next several months. We may pull out of our economic rut greater degree of readily than anticipated, or we may be in towards a prolonged rough ride. But clients and customers will still require to eat. They still need transportation. They still seek entertainment, garments, vacations, chain saws, fit of peevishness sustenance, perfume, office stores, computer servers, tractors, and machinery. As the market tightens up, the best positioned players will survive and thrive. Avoid the mistakes above and you’re more pleasing to be one of them.