Almost anybody can sail a company through good times; it’s the rare (and prepared) leader who can guide it through a long and discouraging storm. And don’t look for things to clear up soon—the “lingering financial crisis fallout” and “ongoing household deleveraging,” which RBC Wealth Management notes in its first Global Insight Weekly report of the year, is leading many economists to believe the U.S. economy will struggle for years to come.
Let me offer a handful of principles you might want to keep in mind as you navigate these still choppy waters.
First, you’ll need to (continue to) preserve capital. Cash has always been king, but these days its reign over business is more unyielding than ever. Just don’t go overboard in cutting resources devoted to growing your business, saving a length of pipe only to spill your opportunities. Instead, take advantage of recent advances in collecting, analyzing, and optimizing data related to your customers and transactions. The two most critical resources in business are time and money, and data well used can compress the former and conserve the latter.
Did you know that Alaska Airlines (ALK), despite having the lowest revenue of seven major U.S. airlines, has the best on-time arrival performance? It does so using data—some 50 different checkpoints before each departure, from how swiftly the door opens upon arrival to how quickly the plane gets refueled to how rapidly passengers board. Alaska knows what’s working and what isn’t because it keeps tabs on everything, as does global insurer Chartis, which just hired a chief science officer. His job is to mine the company’s immense databases in order to reduce costs, enhance forecasting, and improve pricing. Yours may not be an airline or an insurer, but every company has valuable data of some kind; the key is to capture it and leverage it.
Second, protect your client base through creative customer relationship management. CRM is a term that gets bandied about a lot these days and too many companies misunderstand what it really is, considering it permission to blast one annoying e-mail after another. But CRM is more than milking a mailing list, it’s managing a relationship—and managing a relationship requires communicating the appropriate things in the appropriate way to the appropriate people, not hectoring your most loyal fans. A good CRM program should be based on consideration, not exploitation.
Amazon.com (AMZN) famously offers insightful, personalized suggestions based on past purchase behavior, and its Amazon Prime program is brilliant. For $79 a year, customers get free two-day shipping, unlimited streaming of movies and TV shows, and the opportunity to borrow one Kindle e-book for free each month. Prime makes Amazon “sticky” (to use a CRM term) as it encourages customers to make the most of their membership by ordering all of their purchases from one source.
But, you say, Amazon is a multibillion-dollar corporation with the resources to throw at CRM—mine is a much smaller concern. Then consider Los Poblanos Organics, a tiny company in Albuquerque that offers weekly home deliveries of fresh produce and other organic items. Every time one of its customers receives an order she gets a newsletter covering trends in organic food, among other topics. Los Poblanos also sends reminders in advance of scheduled deliveries offering customers the opportunity to make changes, which they can do via e-mail or (gasp) by talking to a live person on the phone. The folks who run Los Poblanos have integrated the needs and wants of those they serve into their day-to-day communications, demonstrating that while CRM may be a new term, it’s not a new concept.
Third, poach prospects from less-prepared and less-focused competitors. Creative destruction is one of the fundamental principles undergirding a free-market economy, and it’s a magnificent tool of macroeconomic advancement. But up close it’s more personal, and when you’re in the arena it’s either create or be destroyed.
Don’t take the easy road and attempt to steal share by discounting; you’ll be harming your own long-term interests and may start a damaging price war. Instead, recognize what every football coach knows—you have to adjust your game plan based not only on your competition’s tendencies but also on changing playing conditions. During tough times the thorny decisions your competitors have been forced to make may have affected their quality or customer service. Identify where their weak points may be and go after them. If that sounds barbaric, well, it’s better to eat than be eaten.
I just ended a relationship with a bank over a silly, $3 “paper statement” fee. Having a fair amount of marketing experience in that industry, I know that financial institutions have been hit hard by new federal regulations and are experimenting with different ways to comply without losing profitability. There’s nothing wrong with any company charging whatever it wants for the services it provides, but as banks are forced to reexamine what types of customers they most wish to please, some will bail.
Finally—and of vital importance—do not neglect the need to prepare for a healthier future by investing in long-term brand building efforts. Not every sale is closed today, and the more desperate you act the more desperate you’ll become. Customers want to be courted, not converted.
In 2009, Dr Pepper Snapple Group (DPS) increased its $350 million marketing budget in the teeth of the Great Recession. The company looked at what happened during the deep recession of the 1980s and found that the most successful packaged goods brands coming out of the downturn were those that had invested in their brands throughout. Sure enough, Dr Pepper Snapple Group has been able to grow its market share in recent years.
These new marketing principles can lead to some difficult trade-offs and contradictory priorities: Preserve capital while preparing for the future by brand building? Protect your customers while poaching those of your competitors? They’re not easy to implement. But the best entrepreneurs will be able to make them work. After all, they excel at innovating. And finding creative ways to overcome the economic hand we’ve all been dealt is just another form of innovation.