INTRODUCTION:

The signs of an imminent recession are all around us. The spillover from the supreme mortgage crisis is weakening both consumer confidence and the consumer spending–much of it on credit–that has been buoying the US economy.

Companies should bear eight factors in mind when making their marketing plans for 2008 and 2009:

1. Research the customer:

Instead of cutting the market research budget, you need to know more than ever how consumers are redefining value and responding to the recession. Price elasticity curves are changing. Consumers take more time searching for durable goods and negotiate harder at the point of sale. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today’s can-live-withouts. Trusted brands are especially valued and they can still launch new products successfully but interest in new brands and new categories fades. Conspicuous consumption becomes less prevalent.

2. Focus on family values:

When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure and rugged individualism. Zany humor and appeals on the basis of fear are out. Greeting card sales, telephone use and discretionary spending on home furnishings and home entertainment will hold up well, as uncertainty prompts us to stay at home but also stay connected with family and friends.

3. Maintain marketing spending:

This is not the time to cut advertising. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known brands–and more consumers at home watching television can deliver higher than expected audiences at lower cost-per-thousand impressions.

Brands with deep pockets may be able to negotiate favorable advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the frequency of advertisements by shifting from 30-to-15 second advertisements, substituting radio for television advertising, or increasing the use of direct marketing, which gives more immediate sales impact.

4. Adjust product portfolios:

Marketers must reforecast demand for each item in their product lines as consumer’s trade down to models that stress good value, such as cars with fewer options. Tough times favor multi-purpose goods over specialized products and weaker items in product lines should be pruned.

In grocery-products categories, good-quality own-brands gain at the expense of national brands. Industrial customers prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, should still be introduced but advertising should stress superior price performance, not corporate image.

5. Support distributors:

In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing and generous return policies motivate distributors to stock your full product line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardize existing relationships and your brand image. However, now may be the time to drop your weaker distributors and upgrade your sales force by recruiting those sacked by other companies.

6. Adjust pricing tactics:

Customers will be shopping around for the best deals. You do not necessarily have to cut list prices but you may need to offer more temporary price promotions, reduce thresholds for quantity discounts, extend credit to long-standing customers and price smaller pack sizes more aggressively. In tough times, price cuts attract more consumer support than promotions such as sweepstakes and mail-in offers.

7. Stress market share:

In all but a few technology categories where growth prospects are strong, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact.

Companies such as Wal-Mart and Southwest Airlines, with strong positions and the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can do so by acquiring weak competitors.

8. Emphasize core values:

Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees.

Economic recession can elevate the importance of the finance director’s balance sheet over the marketing manager’s income statement. Managing working capital can easily dominate managing customer relationships. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.

ACT NOW TO BEAT RECESSION:

A financial perspective for small business survival

Many business cycles are manifestations of interconnected periods of boom and bust. The boom characterized by risks, over-optimism and confidence of the past decades has recently been replaced by fear, diminished expectations and other effects natural of a recession. Recession is here, and everyone is talking about it, in offices, the televisions and in networking meetings.

Recession affects small businesses with low capacity to absorb the effect of cash crunch, the most. Therefore it is a good time for small businesses to reconsider its financial situation, take stock of the challenges and opportunities and take the steps required for facing the long haul ahead. Remember, in a recession or other hard times, you need to be able to act quickly before it's too late to save the business.

Here are a few ways to beat recession:

Get the most of your fixed costs - Fixed costs are also called ‘Sunk Cost', meaning that one has to spend them even if revenue size has reduced. Look for opportunities to spread fixed costs over more revenue streams, or look for ways to absorb fixed costs. For example, if the rent for your office premises is Rs.40, 000, find if you can sublet a part of the space, say a room, or table spaces to non-complete businesses. If you have extra telephone lines, look to see if you can surrender a line that has a higher fixed monthly charge payable to the service provider. Negotiate with your various service providers to cooperate with you and accept a lowered fee. It works.

Question every single expense - Its not likely you'll find one big cut. What's very likely is that you'll find several smaller cuts that will add up to significant amounts, and every three rupee you save can be the equivalent of a topline of ten before tax earnings. You can't save your way to prosperity, but this exercise will help you find ways to free up operational cash.

Reduce inventory - How much can you reduce your inventory? Don't carry larger inventories than you need, and negotiate for just-in-time delivery with your suppliers. If you need to have stock, try to stock up items that turn quickly, and reduce your holdings in low demand items.

Be On Top Of Your Cash - Make a projected cash flow statement for the coming 12 months. Make sure you add all possible expenses, including drawings, yearly taxes, FBT on expenses, and capital payments. Then spend only as per projected cash flow. Once you take charge of your cash flow this way, you will not be left with surprises that may affect the liquidity of your business.

Use Cash Or Debit Cards - As a business owner, this is the most trying of times and personal financial discipline will certainly go a long way to tide the times. Discipline would include reducing unwanted spends. A simple way of saving cash is to use a debit card or cash when making purchases.

If you use cash then this will probably make you think hard about buying things as it will significantly reduce the cash you have in your cash box.

Hold On To Your Best Employees - In recessionary times, your best employees have financial problems of their own, and their first priority is to take care of their families - through a raise from you or through a job change to one of your competitors. Losing well-trained quality workers is something that you can ill afford to let happen. Make sure you keep your best employees through deferred bonus programs - but make sure that they are tied to performance.

Hype up productivity and efficiency - In one company I know of, all staff except mothers with young children have been asked to put in 20% extra working hours. Increasing working hours officially has led to the company doing away with recruitment of 10 new personnel, thereby saving a substantial amount on salaries. The company has also won the admiration of both team members and public alike with this simple move to beat recession. Likewise, efficiency can be enhanced using simple tools like Balanced Scorecards or taking up quality initiatives like quality circles, six sigma implementations etc.

Avoid falling behind on your mortgage repayments - Whether its corporate loan or personal loan, it makes sense to consider making overpayments now - this way you can make underpayments or even take a payment holiday subsequently if you have a cash crunch later. You could also re-negotiate the interest on loans should interest rates fall, although lending banks need not agree to cut their interest rates when RBI reduces the base rate.

Delayed payment of mortgage repayments could be negotiated - Contact lenders as soon as you realize you may have a problem keeping up repayments. You may be able to reach agreement on freezing interest or paying an affordable amount. If lenders can see you making an effort to pay at least something, you are much more likely to get a helpful reaction.

Increase marketing spends - A common mistake that companies make is cut your marketing budget. However, if ever customer intelligence was important it's now. The key is to look at your marketing rupee as an investment not an expense. Use the customer knowledge that you have and implement smart ways of spending on marketing costs.

Focus on customer delight - With less money in circulation, focus on revenue. Contemplate smaller jobs that wouldn't normally excite you. In a slowdown your staff is likely to have less to do. Keep them busy with whatever business there is. Lose the "OK, we'll even do this, now" attitude. You'll be competing for those jobs, and the competition is likely to be stiff.

Outsourcing during recession? Yes! - The rules of how business is done are changing. Focus your attention on maximizing revenue and on leveraging your intellectual capital. How much do you need to be in control? Think about outsourcing work that doesn't create revenue.

For example, if you have been spending valuable time overseeing accounting data, you should consider outsourcing your accounting services to an outsourced partner. Another possibility is to work with part time college students as interns or trainees while ensuring the outputs and deliverables are clearly defined for this model to be successful. Outsourcing also allows you to "demand" output from the service provider, thereby paying only for the services received.

While fund and asset related actions can stall the impact of recession considerably, other ways and means directly related to a safe way of increasing return on investment and increasing business itself include the following:

1. Look for improved ways to reach your target market. For example, if your prospects primarily arrive through your Website, and your traffic is down, you might consider taking some Search Engine Optimization (SEO) steps to improve your search rankings.

2. As much as we dread any economic recession, there are economists who insist tough times force us to become more efficient, and that's a good thing. Perhaps this is most obvious when it comes to staffing.

3. Seek "Referral Business" - Contact your customers, family and friends and ask for referrals. Tell people you need more work. If they believe in your competence, they'll come through for you. A more proactive method would be to join referral networking groups, like the BNI. Although it will cost some money, investing now in focused networks that provide business opportunity will go a long way in a short span of time.

4. Losing Clients? Focus on those with you - Service them - With fewer customers you'll be tempted to reduce the number of customer service personnel. Many of your competitors will. Don't do it. Of course now is the time to cut expenses, but not in ways that touch the customer.

5. Listen! Listening can create a world - Listen to what your customers are telling you. Watch how they're behaving. Consider what it feels like to be your customer in this economy. What would you do in their situation? Now, help them to do it.

6. Change perceptions for a healthy business - and planet - The current perception in the business community is that addressing sustainability is a cost bringing no return; and that’s where issues are framed in terms of moral values and reputation, you can't show real ROI. With fears of an even deeper economic downturn, everyone is looking to their bottom line.

However, Corporate India and companies abroad have consistently demonstrated that companies with corporate social responsibilities have done well even in times of recession. Integrating sustainability across your business processes can bring real returns to business profitability, because eco-efficiency gains go straight to your bottom line. A lean, green business is a healthy business both for profit and planet.

The message is - spend on sustainable model of running business and indulge in activities that engage the employees and stakeholders in conserving the green on earth. Maybe take up tree planting.

By using the above methods, you can not only survive the recessionary phase in your small business, but thrive once it passes.

If an economy has slowed down and market trends show a negative trend, you need not bother. You should have the ability to manage during this tough period. Most of the companies manage by being selective and focused as far as the choice of products is concerned. During this period, an entrepreneur always thinks of cost reduction by a proper allocation of resources and consolidation of businesses.

The IT companies like TCS, Infosys, Wipro, Satyam and HCL, all have remained in the top class of service providers even during the period of recession:

Without bringing down your product quality and reduction in the marked prices, you need to sell your products in the market. For this you need to devise suitable strategies so that your business is not affected by the recession.

These are some of the basic steps to manage your business during economic upheaval:

· Monitor your cash flow: Try to convert all your inventories into cash so that you are saved from the bad sale period. Stock less products as compared to your previous stocks. At the same time control your expenses and increase your liquid funds.

· Offer Discounts and Credits: You can consider offering your products on credit to the final supplier and to your customer too. By offering discounts on your products you can increase your chances of sale.

· Ask your supplier to give the raw materials/products on credit: You can always request your supplier to give products on credit for a time period till the recession phase is over.

· Keep in constant touch with your customers: If you have been maintaining a list of loyal customers, you should not forget them. Pacify them by all means. Also ask them to recommend your name to their close friends or relatives.

· Spend less on the publicity: During this period you can cut down your expenditure on miscellaneous activities like promotional events and marketing campaigns to publicize your product. You just can not shun this activity as this is vital to boost up your sales process, so choose advertising options which offers you discounted package.

· Increase your portfolio of products: For example, you can expand your product line by introducing a new product. But, keep it at a high price and exclusively targeted towards premium customers.

During the time of slowdown in economy, the nation is in deficit of revenues, so you can think of pushing your business across the boundaries like consider exporting the products on a global level. Often the companies take up offshore business in such a crisis. Always try to maintain a good relationship with employees as well as vendors and customers.

REWRITE YOUR MARKETING PLAN FOR 2009-10:

Are we in a recession? No. Will there be a recession in 2009? Probably not. But India's corporate optimism has started to sink on worries about the global economic downturn, high cost of credit, reduced availability of funds, weakening demand and exports slump. So, let us assume that our economy will be in a recession in 2009-10 and that as marketers we need to work within that reality.

When it comes to SMEs (Small and Medium Businesses), the relationship between economic environment and business strategy is very significant since even some small changes in the economic environment or market tend to have far-reaching effects upon these businesses.

So, what should our SMEs (Small and Medium Businesses) do in this scenario? Smart athletes often choose to increase their pace on hills; it is when they sense the existence of a great opportunity in the form of fatigued opponents. The same can be said of smart businesses when they enter a recessionary phase of economy. A recession is the best time for businesses to start their marketing efforts afresh.

So, a recession requires SMEs to modify their marketing strategies. But how? Let's discuss some smart marketing ideas that can make your business recession proof-

1. Market research: When there is an economic slowdown or a recession, consumers start redefining value: they value their every rupee, ask themselves how much they will benefit by purchasing a certain product or service, negotiate harder than ever before, buy less or postpone purchases.

They tend to look for trusted brands while interest in new brands fades. To face such challenges successfully, SMEs need to know more about their consumers and how they are redefining value during a recessionary phase of economy. So, it is not the right time for SMEs to cut their market research budget during a recession. Instead you should double the budget, analysis the changing trends carefully, and change your marketing strategies accordingly. (Also read our story: Marketing research: A must for businesses)

2. Analysis market segments: In a recessionary phase of economy, not all business segments suffer equally; some suffer more, some less, some not at all. In the current economic slowdown in India, for example, only a few business segments like textiles, housing & real estate, and especially the export based businesses have been worst hit while some other segments have not been feeling the downturn so much acutely.

To grab opportunity during a recession, a business must find out and understand the market segments which are least hit or less prone to an economic crunch. There may be enough opportunities in some segments which are till now only the secondary focus of your business.

3. Emphasize on advertising: In a study of the the 1981-82 recession in the United States, McGraw Hill Research analyzed 600 B2B companies in 16 different industries. The results revealed that companies which maintained or increased their advertising expenditures during the period averaged significantly higher sales growth not only during the recession period but even for the following three years.

Several other researches reveal that businesses that continue their advertising and promotional campaigns during hard economic times perform better. When competitors are cutting back on advertising, increasing advertising during a recession can improve market share and return on investment to a significant level and that too at comparatively lower cost. (Also read our stories: Ride the storm in a downturn; recession proof your business, beat the downturn)

4. Pricing: When you offer your products or services at some 'great' reduced prices all of a sudden, it is most likely that your sales will soar as an immediate effect. But it is not a very good idea, especially for a SME with a small budget. Instead, SMEs should consider adding more value to your customers and launching some temporary price reduction strategies such as offering quantity discounts, extend credit to long-standing customers, etc.

But again you should be cautious in implementing this type of strategies as it might make customer think later (one day the recession will be over) that your products or services are overpriced.

5. Increase market share: How can SMEs transform an economic slowdown into a great opportunity? Just by increasing their market share. As the competitors are cowering down and waiting the storm out, now is the time for businesses to increase their market share. However, it is not always possible for SMEs to invest or go for acquisitions in turbulent times.

But they can make the best of their customer base selling more to existing customers and increasing their average spends. It is also important to maintain the quality of your products or services during a slowdown period even though sales fall off. (Also read our story: Increase your market share to break the back of the beast)

6. Reorganize product portfolio: What sells during an economic crunch? Historically, sales of luxury goods are suffered while sales of basic goods remain unaffected. Although it is partially true, businesses need to realize that there are some other crucial factors which need to be considered carefully while preparing their marketing strategy for a recessionary period of economy.

During a recession, people prefer cost effective products to costly solutions; multipurpose products to specialized goods, separately priced unbundled products to costly bundled packages. Also remember that innovative products can play a very crucial role in translating the moments of uncertainty into moments of glory.

7. Spend smart: Needless to say, when you have less pennies in your pocket, it is most important to review your expenses. During an economic slowdown, a business must carefully identify which marketing costs are yielding improvements to their profitability and market share and which are not. When a recession strikes many businesses cut their budgets and people in marketing disproportionately and neglect some crucial marketing strategies such as advertising, branding, targeted communications, etc.

It is a self destructive measure for businesses, especially for SMEs as they are usually equipped with limited resources and manpower.

History is the witness to testify that businesses which enter a recession with a pre-established strategic emphasis on marketing are well positioned to boost their competitive advantage. A recession is a labyrinth of both crisis and opportunities, and the winners will be those who put their thinking cap better. We do not know exactly what awaits our SMEs just yet. The current slowdown in Indian economy might or might not usher in a recession in the coming days of 2009. But our SMEs should prepare for the worst.

The global recession has meant that large corporate worldwide are downsizing their staff, production and expenses. Even some of India's biggest companies have laid off several employees and might continue doing so in the coming months.

Agreed the economy is in bad shape. But remember great opportunities exist even if an economy is in bad shape. It is those who capitalize on these opportunities and sustain themselves even through tough times who will rule the economy in the coming years.

Folks looking to start a new business, Indian startups, small and medium enterprises, SMEs, need to look at the market in a positive way and find their way towards a great future. Young entrepreneurs, start-ups as well as employees who have got laid off, should consider recession as nature's plan to bring fresh perspective and new motivation to the world. Future leaders are current individuals who believe in change, globalization, new strategies and innovations.

THE TRICK TO SURVIVE IS...

The problem we all face is that, when the economy is making very fast progress, the basics are forgotten. When it is the recession, it is about getting back to the basics.

1. Serving the basic needs

Imagine every individual has some basic needs like food, shelter, clothes, healthcare, travel, electricity and water. When market is cutting down their spending, basic spending is always going to stay the same; it just needs more cost effective solutions.

Hence the opportunities coming out of the recession shall be: cheaper food, cost effective housing, and cheaper clothes, cheaper travel and so on...

2. Using technology to scale

Technology is the way to scale. It is the technology that enables us to keep in touch with our friends. It is technology that lets us connect to millions of individuals, know and share information that would otherwise take years to reach -- with the cost that every common person can afford. Businesses not just need to consume technology, but also use it to reach broader audience.

3. Staying global, thinking local

Recession puts business models at test. Recession is going to demand reaching maximum audience for the same investment in production happening in the local market. Anywhere in the world, basic needs of people remain the same. The trick is serving global audience with the product designed for local audience.

4. Cost control with bootstrapping

Venture capital is going to be hard to find, one needs to bootstrap the business with very less resources and still be able to provide the best service quality.

5. Less liability, more utilization

Trick will be to lessen the fixed costs of the business, so even if the sales get affected for some time, it does not put burden on the company's accounts.

CONCLUSION:

While the optimism over India’s growth story may be tempered because of the global economic slowdown, India is still growing and is considered a rising country in the world. India is not in recession but has been badly hit by the global slowdown and the crisis in different sectors.

Till the economic slowdown hit the world and before the Satyam Computer episode broke out, India and China were expected to beat the rest of the world in economic growth.

The high economic growth rate, the tremendous development in IT and engineering in various fields, a young population, the feeling that we are the world champions in cricket in 2010 and “in everything else in the conceivable future” — that optimism, that hype, has been tempered recently but still we are growing and considered a rising country in the world.

We are “not in a recession” and Mr. P. Chidambaram, currently Home Minister and earlier Finance Minister, had reminded us “India is by no means in a recession”. But India has been badly hit by the global slowdown and by the crisis in different sectors everywhere in the country. Its effect could be felt in metros and large cities and perhaps less so in small towns but its effect will be there as well.

Jobs have been lost, demands have diminished, credit has been choked in many areas and even good enterprises lacked credit support from banks. Despite this overall picture, India would still be growing at something like 6 per cent plus. But the environment, the context is very challenging today, which is a good time to reflect on change.

BIBLIOGRAPHY AND REFERENCES:

1. ‘‘International Trade and Economic Growth” by Hendrik Van den Berg & Joshua J. Lewer

2. Macro Economics, Theory and Applications by GS Gupta

3. Macro Economics, by Rudiger Dornbusch, Stanley Fischer & Richard Chartz

JOURNALS:

1. European journal of law in Economics

2. Journal of Economic inequality

3. Journal of cultural economics

WEBSITES:

1. www.financialexpress.com

2. www.livemint.com

3. ibnlive.in.com

Received on 30.04.2010 Accepted on 10.05.2010

Asian J. Management 1(1): Jan. – Mar. 2010 page 08-13