Marketing and selling in tough economic conditions - Article 21:

FAQ's in the present business context

In the present context what areas of costs need to be rationalised?

Cost efficiency is important for any business at any time. Rather than indiscriminate cost cutting, the correct approach should be cost rationalisation. Some important areas would be:

- Utilities (Electricity, Water, Telephones)
- Overtime payments - Market returns (Defective products)
- Borrowings (Cost of capital)
- Distribution and logistics
- Rents and rates
- Other services (Security, Maintenance, Janitorial)

Should businesses resort to price discounting, to generate volume growth?

Discounting only results in further shrinkage of margins, which are already under severe pressure. Quantity discounts are in order, specially cash related discounts. Do not grant discounts for routine retail purchases.

How important are brands in difficult times?

Brands are the most valuable assets of an organization. Hence, brands are important to organizations at all times. Brands help differentiate an organizations products from competitors, command premium prices and generate shareholder value. In a difficult market, the lower end consumer may sacrifice the brand for price. However, at the top end and middle end of the market, consumers remain brand loyal.

The rationale is simple - It is better to trust a known brand rather than experiment with an unknown, which is offered at a lower price.

Should new geographical markets and market segments be entered, in tough times?

Never be negative towards market opportunities. In fact, in tough times, the entry costs may be lower, since foreign investment may be encouraged. Further, a market opportunity should be capitalised upon immediately, or else it maybe gone forever.

Should products or services be advertised during an economic recession?

Definitely yes. Advertising needs to be carried out to keep the products/services in the customers mind. This is specially so, since competition is intense and market offers have multiplied. However, careful evaluation of media options should be made, in terms of reach and cost effectiveness. Do not forget the power of WOM advertising (word-of-mouth) and viral advertising (on-line word-of-mouth).

There are also several new mediums such as mobile devices, social net working sites, blogs and even on-line directories. Value-added sales promotions should be carried out, to build customer loyalty and patronage. The power of Public Relations (PR) should also be harnessed.

Should employees be paid-off during a recession?

A sensitive area, particularly in Asian cultures. If an organization has excess staff that cannot be employed in productive work, then lay-offs should be executed. However, if employees can be productively utilized then it is logical to retain them. Alternatives such as outsourcing and automation should be explored to enhance productivity and cost effectiveness.