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Successfully Marketing a Small Business in a Down Economy

Tue, 12/16/2008 - 2:29pm -- gbm

Frozen in Time
Several times a year I do a SCORE workshop on website design, branding and internet marketing which makes for a busy and information-filled six hours. In previous years, the workshops had 30-40 registrants and sometimes standing-room-only. Last week, the seminar drew 9 people. Setting aside Christmas holiday madness, that is still a weak showing by anyone's yardstick.

The precipitous drop is SCORE-wide and country-wide and not a particular reflection on the topic (based on my post-workshop evaluations and the attendance of other workshops) but rather a reaction to a new, leaner economy looming large in the coming year. This is creating fear and uncertainty, which is leading to inactivity and disinterest in the arena of marketing and sales. This is unfortunate and a sure way to yield poor sales in 2009. Unfortunately, hunkering down and turning off the sales and market pipeline creates its own bleak future.

The Gilded Age
The past decade of easy money and fast spending created a cycle of wealth for everyone. This has made companies forget that marketing and sales is a life-blood activity requiring discipline, planning and implementation. In the glory years where business arrived unbidden, companies have since forgotten how to flex the muscles and stamina necessary for good marketing.

With the wane of the Wonder Wealth Years we're staggering with the post-party headaches. So what now? The decade-long binge is giving way to a new austerity and the aspirin in question for our collective morning-after hangover is returning to the fundamentals of running a good business.

Setting a Marketing Budget: How much?
Well that range runs from 5% to 80% and the accepted cultural norm is 20%. So it looks like this:

  Typical business profit margin 10%-20%
  Expenses/COGS 10%-60%
  Left for Sales/Marketing 20%-80%

What do most businesses spend? A fraction of the 20%. And of course, while we're doing math, these figures should be based on the sales you WANT, not the sales you HAVE. Of course new businesses should anticipate showing no profit the first several years as all revenue is reinvested into the business.

Why Market in a Down Economy: Contrarian Behavior
Any one who has bought one share of any stock will cite the adage: Buy low, sell high. And any broker will tell you that this is exactly what people do. Stock-dumping is a pasttime for many. Wealthy people on the other hand, whip out their fat checkbooks and begin buying with abandon. They have selected stocks they want to pick up on the cheap and do so in earnest.

So how about that same behavior for sales and marketing? The most logical course of action is to market when you need sales. Need more sales? Market more. And yet, as evidenced by recent workshop attendance, people are short-changing themselves and giving up on driving more sales through solid marketing efforts. So the right course of action is to spend money now and through the recession to create a sales pipeline. The cure for a drought is water, the cure for slow sales is marketing.

Measuring Twice, Spending Once
Marketing to be successful must have specific, measurable and trackable results. There are many, many books on how this is done and it is a topic in its own right. Let's just conclude it is a true statement. So now that you have set a budget, assess how to allocate these funds and how success will be measured. Good metrics allow for adjustments and refinements to optimally spend each dollar into a useful sales-conversion ratio.

Alone in the Field
Now that your competition has quit advertising, hunkered down and look like they are out of business, any marketing you do has the opportunity to promote your company as the frontrunner. Use their silo mentality and thinning of the field to pull out ahead. A great opportunity to be the industry leader.

Best-of-Show
In this slower economy with less people advertising, subliminally we believe companies still advertising must have reliable goods, be financially stable, and well-run. Myths perhaps but also likely true. Proctor and Gamble knows they will sell more Tide, Ivory and Crest as people return to proven, value-based purchases. They are less willing to try new products that may disappoint. This is your opportunity to be the Proctor and Gamble in your industry. Setting yourself as the stable choice in the market will pay off nicely as people are cautious to make major purchases as freely.

Diversification and Innovation

One of our clients suffered badly in the post market downturn. His solution was to diversify his revenue stream, upgrade his website to reflect new services and to continue marketing. The same holds true for businesses today. We recommend looking at your revenue model, evaluating the potential areas of growth and providing slow-economy-related services. If you have any questions or comments, please share your thoughts or concerns with us. Remember, success is possible in any market and more so with a budget.