Now that all but the most contrarian or delusional have resigned themselves to the fact that business in 2020 looks nothing like it did in 2019, the question looms: What are you planning to do to survive the fall?
If your answer is something along the lines of cutting back and riding things out, I wish you luck. You’ll need a lot of that – and liquidity – when you consider that macro economic measures like industrial production last month fell more sharply than any time over the past 101 years. Or, that retail and restaurant sales in April dropped twice as much as the 30 days prior, both of which were reported last week in Ad Age. This isn’t going to be a soft landing for those without ample cash reserves.
What CMOs Are Thinking
To learn how brands are responding, Forbes contributor John Koetsler went out and surveyed 250 of the country’s CMOs about their strategies. Among his findings was that 73% planned to do more marketing and advertising. As much as I like the intent, I’m dubious whether they can access the funds necessary to execute. I put this in the same category as a pledge to eat more vegetables. Yeah, I know it’s the right thing to do, but, for the most part it’s not going to happen.
What I found more encouraging in Koetsler’s study was that only one in five CMOs planned to offer discounts. Instead over 50% were focused on client or customer retention. That includes extra service, extra communication, and quality improvement initiatives. I’m all in.
Discounting is a better inventory management tactic than a marketing strategy. It’s how you extract value from products or services that have outlived their useful lives and are ticketed for extinction. When you put markdowns on one of your core offerings, you’re devaluing them. Once customers come to expect it, they will withhold their money until you come back with another margin-killing deal. The bankruptcy of 118-year old retailer J.C. Penney is a stark reminder of what happens when you jump on that hamster wheel.
Brand Strategy: Think Surprise and Delight
The best offers are the ones you don’t see coming. Think of the surprise gift to show your appreciation for those that continue to support you, especially during the hard times.
One of my good friends, a successful and creative restauranteur who has survived many downturns over his career, understands the customer mindset as well as any business leader I’ve ever known. He is paring down his popular menu so that he can reinvest some of those profits in creating new specially priced dessert offerings he will make available for a limited time. In the process he’s not only rewarding his guests, but also giving them a reason to keep returning.
Retention marketing isn’t as much as fun as acquisition, which is why you don’t see a lot of executives embrace the strategy. It’s hard and much less heroic than striding in to a Zoom room with a report showing double-digit increases in new customers. Yet, retentiion is widely acknowledged by experts to be more efficient – up to five times more when you look at lifetime value – compared to the cost of acquisition.
To be clear, you need to do both. Your sales pipeline must continually be producing leads. But, with growth forecasted to be tepid at best for so many segments of the economy, finding ways to build relationships with your existing base will be critical to achieve a soft, yet profitable landing in 2020.