The Recession. As Researchers, Economists and Futurists, we get asked a lot of questions about the recession and most of them leave us feeling like the guy on the left:
In all seriousness, there is still a lot to debate about the technical definition of a recession and how current metrics like unemployment and inflation rates paint a confusing picture for economists. What we can say is that fiscal policy and consumer sentiment has a lot of people in the business community worried right now – especially if you’re not in what are considered “recession proof” industries such as discount retail, transportation and logistics, restaurants and home improvement retail.
At CTRS, we believe that the following things are happening right now whether you believe a recession is on our doorstep or not:
- Inflation is going to add to the compensation demands of employees in a tight labour market with low unemployment. Employers who cannot find the margin in the business to raise pay will find themselves losing employees to businesses that can.
- Businesses are going to put off making investments that don’t have a guaranteed return or are not critical to the continued existence of the business.
- If there is a recession, it looks like it will be mild compared to previous recessions.
Still, this doesn’t mean that as a business, you don’t have concerns. Regardless of which side of optimism one lands on, planning for the worst while hoping for the best is a good strategy. Even if a recession doesn’t happen, preparing for one from a growth and diversification perspective could have some big positive upsides.
The last time that we had a downturn, brands that focused on growth and expansion rather than hunkering down came out the other side in a really good position. In the last few months, we’ve been examining tactics that have worked for companies that did well in the last recession. Some of the more common tactics include:
- Compete harder. If there’s less consumer spending happening, compete harder and beat the competition for a bigger slice of a shrinking market.
- Find new revenue streams. Make sure your eggs aren’t all in one basket by discovering new ways to make money based on your current market and offerings.
- Improve your products/services. Is there a way to make what you sell better, cheaper or faster?
- Double down on relationship marketing. Spend even more time with your clients and potential clients – especially if what you are selling is something that people don’t HAVE to buy if they’re trying to tighten their belts because of a recession.
- Pick a niche or two if you haven’t already. Having a clear primary and secondary market niche to focus on is a great way to defend against other hungry businesses trying to eat your lunch.
- Double down on strategic partnerships. At CTRS, we are HUGE advocates of channel partnerships – good partners can easily add 30% to your book of business.
- Plan to pivot. If any of the above tactics are not going to keep your company alive, it might be time to consider a pivot into a new market entirely.
An overall theme that you might see in these tactics is “plan for the worst, hope for the best”. Hunkering down like you’re in a fallout shelter waiting for a recession to pass you by does not necessarily leave you better off when the economy bounces back. Earlier, we mentioned “recession proof industries”. We don’t actually believe there is such a thing as a completely recession proof industry just as we don’t believe a business outside of these industries has to suffer during a recession.
The difference between businesses who suffer and those who thrive during a recession are those who have good market intelligence, build strategies on that intelligence and act.
How can market intelligence help a business not only survive but thrive during a recession? Let’s look at the recession-busting tactics we’ve listed above, one at a time:
Have You Tried Competing Harder?
Easier said than done, right? A lot of businesses have a rough idea of who their competition is but face two major challenges when trying to stick it to the competition:
- They don’t always know exactly how they are competitive with other companies – why are people choosing us or not choosing us? It might not be for the reasons you think.
- They don’t typically know who their customers think is in their competitive set. If your customers think another business is a competitor – they are a competitor.
We’ve worked with brick and mortar retailers who as recently as 2018 weren’t sure if Amazon should be part of their competitive set. Consumers sure consider Amazon to be a competitor to traditional brick and mortar retailers. We’ve also worked with companies that thought they were competing on price when they were actually competing with high touch customer service.
Market intelligence helps businesses understand their competitive set better and know exactly where to apply leverage to win more market share against competitors.
New Revenue Streams
Coming up with ideas for new revenue streams is easy. Knowing which idea is actually going to be cash flow positive in a reasonable timeframe isn’t as easy. At CTRS, we often have clients coming to us with a range of ideas on new ways to make money – either by offering an existing service/product to new markets or a net new service/product to offer to the current market.
In both cases – businesses need to know if their investment in that new revenue stream is going to pay dividends. One of the best ways to figure that out is to conduct a Market Assessment on those opportunities to confirm which ones will work and out of those which will work, which will have the best return on investment.
Tuning Up Your Products or Services
A trap that many successful companies run into is the assumption that because clients have been happy with the offering in the past, they will always be happy with the offering. A customer’s level of satisfaction with your product or service is contextual! It’s not just about what you offer – it’s about what your competitors are offering and the customers’ needs and expectations – which can change all the time.
Market intelligence can help businesses improve their products and services by bringing the voice of the customer into a development lifecycle for your business to ensure that the offering is keeping up with what customers want and need. Engaging customers and channel partners in regular discussions about your offering and what’s happening in the broader market helps your business stay ahead of changes.
Get Intimate With Your Customers
Alright – that may have come out wrong. YOU know what we mean. Relationship marketing! It isn’t true that people are more likely to buy from people they like but they do buy from people they respect and trust. Respect and trust is communicated through regular contact. Without selling too hard, you need to show up where the customers live (LinkedIn, networking events, in the community, etc…) and demonstrate that you are an authority in your area of expertise. You also want to show customers that your values align with their values – that they can trust you.
The challenge is in knowing what your prospective customers (AKA ideal customers) value, where you can engage with them and the context of what’s going on in their worlds. Market intelligence can help provide this information as well as building up target lists of ideal customers to approach.
There are great automation tools that can help you be present where the customers are online but they are no substitute for trying to build real relationships with these customers. Make time to get to know them and show them what you are all about.
Niches Make Us Stronger
Please forgive our dorky Nietzsche joke but the point stands – picking a strong niche (or two) is a great way to survive economic turmoil. However, picking that niche can be a challenge. We had a client in the Pacific Northwest who wanted to start a motorcycle repair business by women, for women. Not a terrible idea at first blush but the market intelligence on the business didn’t support the idea. In this case:
- Motorcycle ridership in the Pacific Northwest is already lower than other parts of North America because of the regular rain.
- Aftermarket repair shops for motorcycles aren’t in high demand because new bikes come with ridiculously long warranties, many riders outside of warranty want their bikes serviced by the dealership where they bought the bike and a lot of regular maintenance on a motorcycle can be done at home.
- Women represent a minority of motorcycle riders. Although that number has risen in the past few years (up to 19% of riders in 2018 are now women compared to 10% in 2009), it’s still the minority of riders.
- The local trade schools who train motorcycle mechanics crank out very few female motorcycle mechanics for this business to hire.
- Survey data on women’s service buying decisions show that while many women will say they want to support women-owned businesses, when it comes to selecting a vendor in traditional industries like mechanical repair or home repair – women tend to choose older men most often.
None of this is to say that women-owned businesses cannot be successful – we don’t believe that. We do believe that the market intelligence in this case points to a vanishingly small addressable market in this particular business – one that could not ever support the entrepreneur.
Market Intelligence helps entrepreneurs decide in which niche they can build a viable business. At CTRS, we can help you pick the most viable niche from ideas you bring to us or we can help you discover a niche by looking at your current service offerings, your customers and your competitors.
Teamwork Makes The Dream Work!
We already talked about how much we love channel partnerships at CTRS. They drive a substantial portion of our book of business and we’re so grateful for our channel partners. Picking great channel partners is very much like picking great customers. You need to know who your ideal channel partner is before you start forming partnerships.
This means first having data on your ideal customers and then having market intelligence on what types of businesses touch those same customers. An ideal channel partner not only works with the customers you want to work with, they don’t compete with you and there is a mutual benefit that makes sense for them as well as you.
Market Intelligence can give you everything you need to define, identify and successfully approach channel partners. Sharing that market intelligence with your channel partners as a show of good faith is a great way to solidify the partnership.
Pivot…And Hold! Thaaaat’s It! Good!
A throwback to Ross on Friends…PIVOT!
Sometimes no matter how hard you compete, strategize, bop and weave – your current market isn’t going to keep your company alive. That’s when you need to look at pivoting into a new market or a new product/service.
When you already feel like you’re on the ropes – it’s hard to be confident in your decision about which market or product/service to pivot into. Market intelligence can provide you with data that will help you make the right decision with confidence.
Contact Us to Discuss
If you are concerned about a recession or any kind of economic turmoil that you feel unprepared for, drop us a line to talk about the situation. We could talk through which of the above recession-busting tactics might be best for you to focus on first. We’ve helped hundreds of businesses grow and thrive in uncertain times and we would love to help you too.