Business leader discussing business plan with team
When the economy slows, entrepreneurs and executives may become concerned. How will they maintain or continue to grow their revenues if consumers cut back on their spending? Recession issues can push business leaders to take actions that reflect consumer behavior. They’re looking for ways to cut spending, including postponing major projects and instituting staff shutdowns.
A slowing economy affects some companies more than others. Should a recession nevertheless occur, most leaders and their teams will have to find ways to meet the challenges. Despite conventional wisdom, a recession does not mean that all hope for growth is lost. A slowing economic environment can create business opportunities if leaders know how to seize them. Here are four ways to do that.
1. Increase your marketing efforts for your existing customer base
A slowing economy does not mean that consumers spend nothing at all. However, people can look for different ways to prioritize household budget items. Other shoppers won’t change their spending habits much, as they have enough disposable income to get out of a recession. While some customers can change their buying behavior, they usually won’t buy products and services they don’t know about.
In growing economies, companies find it takes more effort and advertising dollars to sell to new customers than current ones. The same principle applies just as much during a recession, if not more so. By shifting your marketing to existing customers during quiet periods, your company can maintain its revenue.
Implement growth marketing strategies focused on customer retention is more likely to deliver tangible results. Research shows that the conversion rate of sales to current customers is between 60% and 70%, while that figure drops to between 5% and 20% for new customers. Marketing aimed at existing customers can translate into growth for new products and future referrals.
2. Build online communities
Suppose you are in a room with a stranger and someone you already know and trust. You are more likely to connect with the person you know. Interacting with a familiar face feels more comfortable, whether it’s because of an established rapport or a sense of security. Having a conversation with a stranger means going out. You don’t know what you’re getting into and the risk that the meeting doesn’t go well is greater.
Translate this scenario to consumers looking for solutions to their problems. They either stick with the brands they know or ask someone they trust to make recommendations. Companies that spend time building brand trust and identity are leveraging the power of social peer groups. The psychology behind affiliation also plays a role.
In times of uncertainty, companies can leverage brand building through social media and digital PR. The goal is not to get people to buy something right away or to focus on your products and services. It’s to show consumers that they can trust your brand.
Creating online communities around a company’s identity generates enthusiasm. It also reinforces the belief that what a brand offers is trustworthy. Once people know they can trust something, they will buy.
3. Network your way to new markets
Marketing to existing customers usually costs less money and is more effective. But that doesn’t rule out the possibility of exploring new markets during a recession. By diversifying your product lines and customer base, you can weather the storm. At the same time, spending thousands or millions on prospect advertising may not be the best approach.
Instead, networking with like-minded business owners and executives can lead to new opportunities. Perhaps one of their suppliers is not performing as expected. If your company offers the same type of solution, you can start a new partnership.
Or maybe a company wants to expand and offer additional services, but doesn’t have the in-house resources or expertise to make it happen. They need someone with that knowledge to assist with an initial rollout so they can use their own resources to continue delivering current services. If your company can provide these assets, you may be able to diversify your business. Instead of just selling to end users, you can start a business solutions division.
4. Tap Employee Insights
As the economy begins to show signs of trouble, workers’ concerns about job security may increase. Staff morale can also decline as stress from inside and outside the work environment increases. One way to prevent possible retirement is to involve employees in the strategic process. When they actively participate in devising solutions to keep the company afloat, they gain a sense of purpose.
You also benefit from employee insights and ideas that can be turned into growth opportunities. Employees see how customers react and hear what they say. Your staff may have additional information that you cannot glean from market research or customer surveys. Employees can point to a problem with how the company is positioning a product or identify a back-end process that is causing frustration.
Turning these problems into solutions can serve as “aha” moments and remove roadblocks from the market. For example, employees may point out that customers are more responsive to pricing structures that emphasize the monthly cost of a product. Offering installment plans instead of requiring all customers to pay the total cost up front can encourage more sales. By brainstorming with employees, you increase the diversity of ideas and strategies.
Growing in a recession
Recessions affect businesses of all sizes. A decline in sales is one of the typical side effects of a slowing economy. Nevertheless, there are still growth opportunities for leaders who want to shift their focus. Some of those opportunities include using growth marketing strategies and leveraging employee ideas. By paying attention to market signals and changes, companies can find ways to keep revenue flowing.
