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There is no arguing that we are facing a down turn in our economy,
I’m not ready to call it a recession yet, but we are definitely feeling
the pinch. That is the nature of business-it goes in cycles of ups and
downs.
When the market slows and sales start to drop, owners’ first
instinct is to cut their costs. One of the first to be slashed is the
marketing/advertising budget. Ad budgets are often at the top of a
cost-conscious small business owner’s hit list because it’s an easy
decision to make and it has an immediate impact to the bottom line.
This is a grave mistake. Smart business owners know this is the time to spend more!
Let me explain. When the economy shrinks it tends to shrink as a
whole, meaning that people are still buying there are just less of
them; the pie has shrunk. If you currently own say, 3% of your market
and if the total market is $300m then your sales are $9m.
During a slow down let’s say that the market potential has shrunk by
50% to $150M, assuming you are continuing to do the same income
producing activities (marketing, sales, promotions ect) your sales
should be $4.5M. I know, as an owner that is scary because your sales
on that marketing budget has gone way down and your instinct is to cut
budgets, sit back and “wait for it to turn”.
What you do at times like this really depends on how you view
marketing. Is your marketing viewed as an expense- something you just
have to do? Or do you view it as an investment?
Smart marketers know that while all the competition is standing on
the sidelines, if they have the audacity to actually spend more
(invest), they will capture more of the market share(because
competition is waiting) and when the markets turns around they will
reap the huge benefits because they have a greater market share and the
pie is now bigger.
So in our above example if you were to get just 2% more market
share, which would be 5%. When the economy recovers and the market
value goes from $150MM to $300MM your sales would grow and now be $15M.
When is the best time to buy in real estate? When the market is
down. When is the best time buy stocks? When the market is down. The
same principle holds true for small business marketing.
Have courage and think strategically. Up your marketing spend in
this down market. Invest in the longer term growth of your company.
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