Every day brings another grim headline of falling retail
sales, impacting on the health of suppliers and colouring the mood
at the interface of store personnel and shoppers.
These headlines and disturbing stories, which consistently
outnumber and outweigh any good news stories, are no small
contributor to the self-fulfilling downward spiral of the
Australian marketplace.
The most recent commentaries want us to know that this may
not be a cyclical situation. Rather, they suggest, it is an
irreversible shift (or "adjustment") to a new lower water level in
retail performance expectations.
Certainly, we can help this become a reality by
encouraging business to 'cut' its way through the immediate
problems and push consumer confidence down further
(employees, after all, also happen to be
consumers).
Or we can take a mid-to-longer term view, and with "tell
it like it is" communications to shareholders, and the (thin)
possibility that analysts / writers may get off their short term
focus, we might find some innovative and considered answers to
re-energising the consumer spending.
It will take more depth in probing customer insights, an
applied understanding of shifts in channels of information and
transaction, and genuine engagement with customers (suppliers
and retailers together) to motivate the re-opening of minds and
wallets.
The word 'recession' is back in management and Board
language. Not by reason of a technical measure, but from a
realistic assessment of the public mood and behaviour, and the
nervous twitches of the market.
As we have noted before, consider the task of explaining
to an alien why a country with relatively low unemployment,
contained inflation and interest rates to a fault, and rich
with the resources wanted by the world's strongest growth region,
is in a state of recessionary paralysis. Not easy.
We won't add another voice to the known list of
contributors to the current malaise. And we won't
pretend that correcting these negative forces is a simple task (e.g
the poverty of correctly focussed political leadership is not
something we can easily or quickly cure).
But there are some things that can be done by business
(and are being done by some successful leaders) that are
proven by relatively recent experience to be effective in very
testing times - initiatives that energise people and
stimulate action.
These are not based in economic theories or academic
models. They are the tough, but imaginative day to day decisions
that have proven to make positive internal and consumer responses
happen, and will do it again.
Below are some observations from working with companies
who have not only held their ground in recessionary
conditions, but created competitive advantage out of the market
circumstances.
We have set these down under the six key growth drivers
that we review in our client work, so you may choose the growth
driver most salient to your situation.
1. Clarity of direction
Recessionary reviews can be the best time to re-focus and
cut distractive activities. They may also be the best time to
acquire or invest, at least for those companies that have a sound
balance sheet. In both cases, a recessionary state of mind provides
a strong platform for change: Boards, investors and staff all are
more likely to accept a change of focus and the resources necessary
to make that happen. What longer term investors are typically
looking for is a good balance between making the organisation 'fit
to fight' and plans to still drive top-line growth. History
suggests that you can't 'cost-cut your way out of a
recession', without inflicting damage to deal with down the
road.
2. Market sensing
Now is the time to ask questions such as:
"Why didn't we see this coming?" and "Why didn't we have a plan
ready to roll for this scenario?". It's a good time to review the
market sensing capabilities of the company, including the sacred
cows such as brand tracking studies, ongoing U&A studies,
forecasting models, etc. Are they focusing on the future or
providing explanations to the past?
Indeed, there are many things that can be learned from the
past: How did consumers react during the last recession? What did
the competitors do? What worked best with our retailers and/or
suppliers? Was price promotion really the most effective tool
(margins lost?). Some patterns from the past could be used to guide
consumers' likely behaviour in this severe sales decline. At the
same time, a clear understanding of future trends is the key to
growth, as it drives improvement and innovation.
3. Continuous improvement
We have seen many companies successfully launch cultural
change programs in a time of recession, driven by CEO's that want
to drive a more innovative organisation. The question central to
these programs is: How can we deliver more value to the customer,
at a relatively lower cost? This question applies to many aspects
of the company. For instance, in Sales: how to find more time to
spend on sales and spend less time in the back office or on admin
activities; Service: How to reduce red tape, so that customers
experience better service; Product: Channel and portfolio - How can
we make the same service available at lower cost
channels?
For some companies, a negative market immediately
represents an opportunity for anti-cyclical investment: they take
advantage of lower media costs, lower cost for online campaigns and
invest to strengthen their presence, to reap immediate benefits and
come out of the recessionary times with a much stronger
brand.
4. New growth initiatives
Consumers seldom leave your category; They downgrade,
reduce frequency, postpone, deliberate longer, buy
compartmentalised, choose the cheaper option, and find
alternatives.
Understanding this behaviour can provide opportunities.
Coke's very small 15ml can, went on the become a major profit
driver in Europe, even though it was launched as a recession
stop-gap measure.
Reviewing charging and pricing (e.g., weekly instead of
monthly), launching lower end sub-brands, offering lower entry
product options to reward and induce the customer's loyalty are all
options that can yield current, but also future revenue
opportunities.
5. Organising for growth
Intensity - not stress - is the father of ingenuity.
However, this pressure of intensity can also spiral into internal
conflict.
Smart CEO's leverage this pressure. They create a good
sense of urgency and use it to their benefit to streamline their
organisation and foster better collaboration.
For instance, by asking marketing and sales to sit
together and develop a plan to work more seamlessly together
for greater impact. Defining what is really necessary to win and
how marketing and sales depend on each other can improve results
considerably.
If the customer is placed centrally in this discussion -
ideally by means of a fact based or otherwise 'dispute-free' source
of information, (such as a co-created piece of intelligence) - a
tough time can be a good time to leverage a need for better data
and insights to drive customer centricity.
6. Impact
Challenging times are an obvious reason to review
marketing budgets, often followed with revelation that, reduced
spending doesn't make that big a difference.
This scenario probably means that the marketing budget was used
ineffectively to start with. CEO/CMO's should use these times to
fundamentally review the touch points of the company: which touch
points really contribute to the consumers' decision and how well
are we executing at those touch points?
Are our metrics facilitating decision making? In many
companies metrics are like the air pressure in car tires: essential
for driving, but once the tire is leaking, a metric would be
useless in understanding why and how. There is only one
sensible remedy: replace the tire - Questioning or replacing
metrics is not easy, because internal performance measures, systems
and even remuneration are based on tracking and metrics.
Challenging times offer an opportunity to choose the
right metrics. Good metrics address the
critical decisions on which the strategy rests. They are future
looking and what better time to question them when "things can only
go up?"
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