Getting profits even in times of recession

I had a chance encounter with a friend a couple of days ago and I found myself digging into his current undertaking. Like the all too common gloom nowadays, the script was repeated about how the six-month old project had been put in abeyance owing to this “recession”. 

I had a chance encounter with a friend a couple of days ago and I found myself digging into his current undertaking.

Like the all too common gloom nowadays, the script was repeated about how the six-month old project had been put in abeyance owing to this “recession”. 

One question I still do not understand is why businessmen the world over are still stuck to the assumption that freezing the budget is the best course when gross spending is forecast to take the dip. Times are hard.

However, the point is this: we are facing a recession, not a depression! 

This temporary economic crisis has only been caused by the ‘re-gearing’ of the capitalistic wheel from inefficient ventures like the mortgage industry, where the main contention is the manipulation of demand and repayments. 

With a frozen budget comes the unexpected termination of programmes that have already swallowed up a good measure of set-up costs.

Would it not be prudent to just complete these anyway? Perhaps a radical rationalisation of spending needs to be undertaken.

Marketing has to do with the realisation that the sole purpose of entrepreneurship is the creation and sustenance of demand so that pecuniary benefit may accrue.

This illusionary wait-and-see situation comes at the wrong time. In my humble view, there has never been a better time to leverage greater opportunities than this time when everybody seems all too cautious for luck.

In the area of marketing communications, for instance, by having just half the number of competitors folding up their marketing, spend a higher propensity to gain market share emerges for the risk-takers.

Indeed, marketing strategists indicate that net effective demand for consumption is still inelastic. We still buy those cups of infused tea, don’t we?

The arithmetic is very easy. To determine how much space you still have, simply assume that effective disposable income has dropped by 15 per cent.

So go on, please prop up the ads - this is the time, for, sure, there is less ‘noise’. Much of your competition has taken a retreat and so there is less crowding for the consumer’s ear.

This is the time to splash it all over because the chances of building equity are very high.

Think of ways of engaging your potential consumers with new propositions on why your product is the best. Second, surprise everyone by committing the sin of lowering prices.

Run losses on discounts initially but gradually seize more of the buying hands to make more and more profit. In equal measure, creativity in subliminal communication with consumers also stands to score well.

Convince the market that you care. That you understand that times are tough and so you have cut your prices. There is the formula known as the Bass-Lewin that has been integrated into cutting-edge market planning software to graphically indicate how much the subsequent ‘excitement’ that builds around your product can be turned into instant revenue.

Think of how possible it is to determine the mathematical relationship between, say, applied marketing effort and potential market share.

When the competition is spending less on creating and sustaining demand, you have a greater chance of monopolising your industry by increasing your presence.

However, marketing expenditure should not be sustained without quantification for this would negate the essence of marketing research and accountability.

One way of assessing the relevance of marketing strategies would be to find out whether your efforts are changing attitudes and behaviour toward your products. Share of market and revenue goals may appear attractive enough.

Closer scrutiny may reveal utter lack of loyalty on the part of your customers, necessitating further investment in communication, more so in product experience whereby the value proposition is tested, felt, and amended before the very customer.

Therefore, while austerity measures may be necessary to enable better cash management, their benefit is in the short term.

The problem is that blind rack cuts are always seen as a long-term solution. When marketing spend is thus curtailed, the entrepreneur enters the path to self-destruction for mere cuts do not create any profit.

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