Happy families are all alike, every unhappy family is unhappy in its own way.
—Leo Tolstoy in Anna Karenina
A slowing economy hurts everyone, but the extent varies. Each company is unhappy in its own way. The world is no longer the big flat smiley dreamt of by Tom Friedman, but fast reverting to the lumpy, grumpy, pock-marked soccer ball that it used to be. Though the technology exists to create a flat world, we still aren’t there in terms of the governance, economic and geopolitical systems.
There are various factors that determine the impact of the current economic crunch on a firm. First, how dependent is the firm (or its customers) on credit? Any credit-oriented industry such as construction or automobiles will be more affected than others. Second, how much of the firm’s revenue is derived from countries with high exports? Export-oriented countries such as South Korea and Taiwan are likely to be more affected than India, where exports are just 25% of gross domestic product. Third, which industry is the firm in? According to research by McKinsey, in previous recessions, consumer staples have been among the least affected; consumer discretionary spending on goods such as clothes, home furnishings is the most affected; information technology is usually first-in, manufacturing is often last-out; while energy, utilities, and health care remain relatively unaffected.
The worst-case scenario is if a firm needs loans to manufacture material that consumers buy on credit, and sell to people living in countries with high exports.
On a happier note, if the firm is a challenger—a relatively smaller firm taking on much larger competition—this recession could give it the break of a lifetime. If it has the resources, it can expand rapidly by buying rivals or partners who are financially distressed, opening more locations while rentals and land values are depressed, getting breaks from governments keen on employment, negotiating better terms with partners and suppliers. Typically, challengers based in emerging economies such as India tend to offer a price advantage over the incumbents and while this may not have been a door opener in the past, it will allow the company to easily gatecrash in the current quagmire. Think about it: A Rs10 crore company can (profitably) grab just 10% of the sales of its Rs100 crore competitor, and very simply double its size.
No one can pretend it’s business as usual and continue without making changes in marketing programmes. There are some things that a firm should consider here. First, redefine its customer: Economic changes may have increased or decreased the potential pool of customers. Second, marketing should be the voice of the customer: A firm should invest in research to understand current buyer needs and preferences. This may require redesigning the product portfolio. Third, focus on campaigns that deliver sales results in the next 12 months, deferring long-term “corporate” brand campaigns. Fourth, build customer communities. These will reinforce a firm’s brand values and also provide a low-cost means of communication. Fifth, change the communication mix. The downturn has repriced media and thus changed their return on investment.
We can’t know what the world will look like at the end of this downturn. Will there be a shift towards India and China? Will it still be a unipolar world? As marketeers, we not only need to plan for those contingencies but also focus on thriving in the current uncertainty. Otherwise, there may not be a tomorrow for the organization. To quote Tolstoy again, “There is only one time that is important—now. It is the most important time because it is the only time that we have any power.”
Jessie Paul is chief marketing officer at Wipro Technologies. Comment at email@example.com