Monday, June 22, 2009

You Survived the Worst, But Will Your Business Survive the Recovery?

(from Issues for Growth Vol. 18 , No. 9

One of the most counter-intuitive facts about recessions is that there are more layoffs and more bankruptcies AFTER the recovery has begun than during the recession itself. This has been true with past “v-shaped” and U-shaped recoveries, What will happen in a very FLAT (_____)-shaped recovery?

In a recent Wall Street Journal survey of economists, while most economists found that the recovery will begin sometime in late 2009, there was an alarming statistic about the duration of the recovery: “The depth of the downturn means it will take years to eat up the slack created by the recession. Nearly half of the economists said it will take three to four years to close the output gap, while more than a quarter say it will take five to six years.”

“We're going through a transition in the economy back to a more normal share of consumer spending relative to GDP," said Paul Kasriel of The Northern Trust Corp. "This is a very deep and defining recession that is going to lead to a transformed U.S. economy, and these transformations don't take place overnight."

If you would like to read the entire WSJ article from the May 14, 2009 publication see the following link:

Could this be true? 3-4 more years? 5-6 more years? Will it be that long before we return to economic vitality? If these economists are right (and yes, I admit that’s a dubious prospect), we are in for a very long, slow process of rebuilding. Companies hoping for a rapid rebound will be in for a shock. Some companies will not have adequate cash positions to survive the next 5 years. Some companies will seize the opportunities to grow dramatically while others are continuing to retrench.

Which will your company be?

Your company needs to plan carefully, have everyone’s objectives and metrics well-aligned, execute well, and be prepared to take advantage of opportunities and uncertainty.

Here are some random facts about surviving the recovery:
1. Companies that maintain or increase marketing during recessions reap a 3.2:1 sales advantage.
2. On average, only 10% of customers in any category buy exclusively on price.
3. Minority recapitalizations can be a great way to bolster the balance sheet to take advantage of “recovery opportunities.”
4. Customers actually buy more of less discretionary items in the downturn.
5. Customers increase spending in education, reading, personal insurance, health care, and food at home during recessionary periods.
6. Know your customers.
7. Don't market with a tone of fear. Market your core values.
8. Drop your weaker distributors.
9. Focus on reliability, performance, and trust, in your marketing message.
10. There's a key distinction between price cuts and discounts that shouldn't be ignored.
11. Acquire good brands if you're in a good cash position.
12. Maintain frequency of marketing, decrease duration.
13. Shift your resources to your key profitable customer pools.
14. Anticipate competitor moves.
15. Be decisive when given the opportunity to build, buy, sell, or partner.
16. Email marketing to be used as an acquisition tool in downturn economies, not just a retention tool.
17. Continue to carefully monitor accounts receivables for all customers.

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