Does the Economic Slump Mean Small Business Disaster?
I am getting bombarded by the media’s doom and gloom about the economy! I can’t take it anymore!! My future, my financial success, my life are in my hands and in my hands alone. That is my rock. That is what I must believe. Because the minute I assign blame to anyone else – or any other entity – including “the economy” I’m done for. At that moment I can do nothing to change any aspect of it.
My company is holding its own. In fact, we’re still growing. More slowly, yes. But growth is growth. We are up from this time last year by 6%.
But, even though I can control my own income and my own life, most business people feel, understandably, like they are totally at the whims and control of the economy. I mean, they can see the numbers going down. They can observe less sales and less reach from their potential market. How do you go from viewing something obvious to changing it totally. First you have to believe you can. If you’re reading this and you’ve already decided ‘it’s impossible to do well in this economy’ then just give up and close the doors. I’m serious, stop reading. You’re done. BUT, if you think you CAN do something about it and if you believe me, well – carry on with your reading.
So let’s look at the reality. It is true that people are spending less. It’s also true that business owners, due to that observation, are marketing less. Well, take advantage of that! If you market MORE you will pull in the business instead of those others that aren’t marketing.
In the book, Ogilvy on Advertising, David Ogilvy (winner of the Parlin Award for Marketing) states his own empirical observations on marketing in a recession. He says,
“What should you do in time of recession, when you need every penny to sustain your earnings? Stop advertising?
“If you stop advertising a brand which is still in its introductory phase, you will probably kill it – for ever. Studies of the last 6 recessions have demonstrated that companies which do not cut back their advertising budgets achieve greater increases in profit than companies which do cut back.
“In a Morril survey of 40,000 men and women involved in the purchase of 23 industrial products over five years, it was found that share-of-market went up in bad times – when advertising was continued.”
He goes on to source the American Business Press that had pie charts of sales of companies which cut back their advertising expenditure during the 1974-75 recessions compared with companies that did not cut back. The companies that did not cut their advertising budgets had more than doubled their sales 2 years later while sales from the companies that cut their advertising had barely gone up 50%. Three years later sales were down for companies that had cut their advertising while it was up for those that did not. The net income for these companies also followed the same suit over the same period of years – those companies that did not cut their advertising had more than tripled in sales, while companies that did cut back during the recession had barely doubled.
There is a consequential effect that marketing has on your business 1, 2, 3 years and more down the line if you don’t market during a recession. And while the cost of living increases along with inflation and other factors, you will be losing sales and income down the road when you will really need it if you cut back on marketing during times of recession. But as I say, even though unfortunately, companies will invariably cut their advertising budget during a recession so be smarter and use that to your advantage – for more business and growth now as well as in the future, because if you do you will come way out ahead with the recession starts to wane.
At my company, PostcardMania, we are definitely being hit by all the business owners that feel they had better cut back on their marketing due to the economy. Don’t misunderstand; we are still growing and doing great but our growth has slowed slightly. And that growth is harder won these days.
It’s at these times you have to be smarter. You have to market smarter and reach higher quantities of people with your marketing message. Your return on investment MAY be lower and you may earn less per dollar spent on marketing. But think this through… if you cut back on your advertising you will undoubtedly have less business coming in. Operating that way, now look a year down the road… how’s your business doing? Scary.
However, if you increase your advertising and marketing budget and your competition is cutting back what will happen? Look a year into the future on this one too… what do you think will happen? Who will get the business?
Look at what the big boys are doing. Are they cutting back on their marketing? Some are, but will regret it. But certainly not all. Witness your own mailbox – you don’t have to do a hard search for this data. Bed Bath & Beyond, Crate n Barrel and JC Penny, even the AARP is marketing heavy. Read the March 2008 issue of Fortune Small Business magazine article, ‘Slump Busters’, where you can meet business owners who have devised smart strategies to prosper amid the economic slowdown. In the article, Villanova School of Business professor John Pearce II, made an interesting observation: “Recessions are a period of opportunity; during recessions large companies abandon marginally profitable customers, and small businesses can get those customers.”
Capitalize on that and gain those customers by marketing. You have to look at the long-term future in order to ride the recession wave and come out on top.
You can go into agreement with the thousands of small business owners and cut back on your marketing and you can get smaller and possibly even close down. You can do that. Or you can emulate the companies that are surviving and growing. It’s up to you really. Personally, I refuse to be dictated to by the economy. I have plans! I will invest in myself, my own smarts, my own persistence, my own perseverance, my company, my staff, their futures and on and on.
Giving up, shrinking, for me is not an option. It shouldn’t be for you either.