No one has missed the global crisis we are in right now. A crisis that caused countries to completely close their borders, caused the worst stock market crash in modern history and where large parts of the economy are completely shut down. This is happening for real. But it is also a fact that there are factors that separate winners from losers in a situation like this.
This is not the first time the world has suffered a major economic crisis. Over the past 50 years, we have gone through nine major economic crises, all with different origins and consequences: Black Monday 1987, 9/11 and the 2008 financial crisis to mention a few. Even though the "corona crisis" is basically not an economic crisis, the suites of this event will have unmistakable and undesirable economic and humanitarian consequences. What does this mean then? That we should lie down and give up? Wait and see? No, quite the opposite. From history we can learn several things. Perhaps the most important lesson is to understand the fact that it is now decided which companies have the ability to adapt to new conditions and thus emerge as winners when it turns around.
Based on ProSale's own research and studies and experiences from previous crises (not least the 2008 financial crisis), we have listed seven areas that distinguish winners from losers in times of great challenges.
1. Send a clear message that you will become a winner!
Do you see yourself as a victim of the circumstances or as a player who can change? Having confidence in one's own power and mobilizing one's strengths is crucial to success. Especially when negative thoughts easily gain a foothold in the company. Therefore, start by sending a clear message to your organization. Should you have a crisis or not in your company?
” I was asked what I thought about the recession. I thought about it and decided not to take part.”
Sam Walton, founder of Wal-Mart
This is the fuel that you and your organization need to hear in tougher times. It's not about whether it's doable or not. In this situation, it is a symbol that we must all roll up our arms. It's going to be tough. And we will be affected. But in tough times, it is important for leaders to send clear signals that you will emerge victorious on the other side! Therefore, start by sending out the message: Crisis=future opportunity!
2. Anchor the faith in success - don't let negative thoughts take over!
The major problem of a recession or crisis is not the downturn of economic indicators, it´s the downturn of people's minds. Faith in success is one of the most important factors for achieving high sales performance. This shows ProSales’s long-standing research of thousands of sales reps. 1 And it´s even more true in a time of crisis. The belief that one will succeed results in ambitious efforts, and the belief that one will fail leads to underperformance. As a leader, it has never been so important to inspire, create positive images of the future and make employees believe that it is now that we can take market shares, that is now that we can invest offensively and that is now that we can run away from our competitors. Although the numbers say something different. The pessimists must not take the upper hand. Therefore, focus on positive thinking!
3. Think long term - crises don't last forever!
During the last banking crisis, I gave a talk where I asked the audience how long you think an economic downturn lasts on average. To my surprise, I got a response three or four years. Fortunately, that's not true. In general, economic recessions don’t last as long as growth periods do. Since 1945 the average duration of a recession is 10 months.2 Why is this important? Well, first of all it´s important not to lose perspective. Crises do not last forever and neither does this. We don´t know for how long this crisis will remain but we have to think long term. Secondly, it makes us act a little more rational. We must make changes in the short term. But not too drastic changes that affects our long-term opportunities. Thus, don’t forget about the long-term perspective!
4. Speed and brake simultaneously!
In times of crisis, it is important to prioritize right. But it is rarely a good idea to apply the brake when it comes to sales and marketing. Braking may be necessary, but more importantly, dare to keep or even increase your investment in marketing. In a study where 600 business-to-business firm´s net sales and marketing expenditures from 1981 to 1985 where analyzed the researchers revealed that companies that did not cut their budgets or chose to increase spending experienced significantly higher sales during and after the 1981-82 recession.3 In fact, at the end of 1985, those companies that had maintained or increased their marketing during the recession enjoyed an average sales growth of 275 percent over the preceding five years, while those that had decreased their advertising had to settle for an average sales increase of only 19 percent. Clearly, cutting marketing investments during an economic downturn can mean both short- and long-term negative effects on sales and profits.
5. Spread the risks and diversify your offering!
During the recession in 2001, McKinsey studied over 1,300 US companies and found that companies that emerged from the recession as industry leaders generally had more diversified offerings and a greater geographic presence before, during, and after the recession than did their less successful counterparts.4 In short, they sold their products and services in different markets and to different target groups, targeted towards profitable customers. This gave them greater strategic flexibility that became even more important during the recession. Those who only had one offering targeted at a specific target group in a market were extremely vulnerable. This strategy has probably never been clearer than today. Some industries and companies are extremely hard hit by the effects of the actual crisis, while others have never had more to do. Therefore, select the target groups that are not as hard affected and focus on the products that can solve the challenges the customers are facing today. Ensure that you spread the risks by having a balanced offering with different target groups.
6. Play offense by reinvesting selectively for commercial growth
Following the global financial crisis in 2008, Bain & Co conducted a study of 3,900 companies comparing winners and losers.5 The companies that succeeded best had an average growth of 17 percent compared to zero growth among the losers. One of the four areas that was significant for winners was that they played offense and distinct by reinvesting selectively for commercial growth. While others thought only about survival, they went on offense early in the cycle of recession making top prioritizes among customers and prospects, optimizing the marketing mix to do more with the same or less and improving the customer experience by making it simpler and more personalized. The losers waited to see what would happen which made them too late to make the necessary adjustments, they bought the wrong asset or paid an inflated price. In the rearview mirror, we will probably see the same pattern after this crisis. The winners will be those who dares to invest early, make the right prioritizes and act with power!
7. Focus on customer value and risk, not product or price!
In tough times, customers become more risk aware and short term oriented. They don’t dare to take chances as wrong decisions can have major consequences. In such situations, it may even be justified to employ suppliers who charges more but who are solving the problems that customers are facing right now. It is in times like these that we will see which companies really succeeded in managing customers' perceptions of risk and value and adapting their offerings accordingly. Offering lower prices or selling products that are far down the customer's priority list will not succeed very well. Focus on finding out what values customers are willing to pay for in this specific crisis and make sure you can solve this instead of lowering the price.
1 Larsson-Broman, H. (2008), Sales Efficiency Study. Stockholm. ProSales Institute Sverige AB.
2 National Bureau of Research. Business Cycle Expansions and Contractions. Retrieved October 1, 2008. Downloaded from https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
3 McGraw-Hill Research (1986). Laboratory of Advertising Performance Report 5262. New York: McGraw-Hill.
4 Dobbs, R, Karakolev, T and Raj, R (April 2007). Preparing for the next downturn (article). McKinsey & Co. Retrieved 2020-03-17 from https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/preparing-for-the-next-downturn
5 Bain & Company (2019), Beyond the Downturn: Recession Strategies to Take the Lead (press release). Retrieved 2020-03-19 from https://www.bain.com/about/media-center/press-releases/2019/winning-in-a-downturn/