The planet’s most unassailable financial institutions, trillions of dollars worth of investment value and hundreds of thousands of jobs have vaporised. You decide, in the darkest hour of this, the ‘Great Recession’, it’s the ideal time to launch your new business. Friends and colleagues think you should be committed, writes Simon Barwick from BB&P.
In fact, you should be commended.
The bold entrepreneur recognises even the most devastating recession as a rare opportunity to make hay. While the competition withdraws from the market, the entrepreneur seizes the moment to establish a brand, win customer share and get positioned for the upturn.
A surprising number of great brands were born in such times. That epitome of capitalist enterprise, Fortune Magazine, launched in 1929 and became America’s leading business magazine, a position it has pretty much enjoyed ever since. Taylor basketballs, Revlon, the ‘Intel Inside’ brand, all were launched in severe recessions.
Arch-entrepreneur Sam Walton, founder of Walmart, famously said, “I was asked what I thought about the recession. I thought about it and decided not to take part”. Evidently his philosophy outlives him at Walmart where, in the UK, the brand has just created 7,000 new jobs.
Cayman’s bright beacons of boldness
At BB&P Advertising, the Cayman-based brand consultancy, we’ve recently helped launch two new brands, both in the property sector: Charterland, a property consulting firm, and Agemian, a bespoke design and construction consultancy. This at a time when other firms are slashing spend, people and hopes for growth.
“We’ve been amazed at the instant awareness we’ve been able to generate,” says Simon Watson, a Charterland principal, “No-one else is out there talking to the market and it seems we’ve got the media sphere to ourselves. It’s been a dream start.” Customers that in the past might have had no time, interest or motivation to consider newbies Charterland are happy to talk business. “They want to see what new ideas, ways of doing things, can bring,” continued Simon Watson, “And, of course, the more competitive rates that we offer are a plus”.
In the negative context of a recession, the launch of a new brand shines out amongst the gloom. The audience is naturally more supportive and curious. And less distracted. Conversely, the competition tends to be scared witless. “The best athletes punish[ed] the weaker opponents in the hardest part of the race,” says Arvind Rangaswamy, author of a 2005 Penn State study on companies that used recession times to gain market share.
Nicola Agemian who founded her company in October 2008, wondered if the timing was right. “Then we realised that ‘recession’ was another excuse to delay the launch,” she recalls, adding, “In fact, we turned the negative into a positive”. Understanding that when customers are wary to spend, value is everything. Indeed, as the downturn encourages her own suppliers to improve their service and lower their prices, Agemian is able to pass the benefits on to her customers, further sharpening her competitive edge.
The Cayman economy is the better for these intrepid, dynamic business risk-takers.
Market share: grab it while you can
Take a copy of your favourite magazine and compare its size and weight with the issue of the same month last year. Notice anything?
The market leader’s ad budgets have been slashed. They’re laying off marketing staff. Pulling their sponsorships. Disappearing from the sight of their customers. Customer share, market share, it’s all there for the taking, and, if you’re smart, for much less than it costs during fat times.
Any brand communications will have an enhanced effect, greater reach.
Ignore the short term, ignore the shareholders
It’s easier for the lone operator, or the start-up team, to make an aggressive push for market share – they only have themselves to answer to. If you’re an established business, these are the guys who will be eating your lunch. In an established, hierarchical business the enlightened marketing manager is going to be grilled for maintaining or upping spend through a recession.
After all, advertising’s the easiest line item to cut; it’s an expense, right? The first claim is usually correct, the second is dead wrong. An expense is something that provides no return. Advertising, unless you’re doing it badly, provides measurable ROI. The real problem is that, during a recession, ROI is typically spread out longer, often into the upside of the cycle. But, in fact, those brands that maintain or increase spend during recessions increase market share in the post-recession period.
The CARR report of August 2001 showed that businesses who were aggressive advertisers during the previous recession increased their share 2.5 the average for all businesses in the period following the recession. McGraw-Hill’s research of 600 companies from 1980 to 1985 showed that the sales of business-to-business firms who maintained their media presence in the 1981-82 recession had risen 256% over those that didn’t maintain their advertising.
As Simon Watson says, audiences and sectors traditionally out of your reach, or who would never be prepared to try an unknown brand, are happy to give you a chance. This is due to ‘value shifting’, just one powerful effect of a recession.
Look at your own experience as a consumer: a new carwash outfit on the other side of town is offering a wash at 20% less than the folks that normally do your car. Despite years of using the same service, you’ll give the new guys a shot – hey, it’s a recession. The same goes for opting to ski Canada this year, rather than Europe. Or buying a new Nissan rather than a Mercedes. The trick, as a marketer, is to figure out quickly which target market is moving into your brand radar and adjusting your sights to that often higher segment.
For Cayman, as a tourism destination, that means not promoting budget vacations to lower disposal income groups but rather pitching a value product to people that might have been otherwise going to St Barths this season.
It’s about mining the opportunity seams that lie within every recession mountain.
Easy, Tiger, there’s a recession raging
You can’t just up your spend and buy all the ad space out there. The market psychology shifts during a downtown and the audience responds in different ways. The bold marketer will use a completely different mix of channels, proposition and message to that of normal times.
Now is a critical moment of change. The normal rules don’t apply. Everything is up for review – entrenched habits, relationships, traditional ways of operating – to the point that the recession can be used as a lever, even an excuse, to overhaul your business structure.
Darwin would love it.