Carlson School associate professor provides do's – and don’ts – for boosting your organization’s marketing resilience and success in a volatile economic environment

Gas prices are rising, inflation is soaring, the economy is up one day and down the next, and your customers, employees, and executives are worried and edgy. You know that you need to do something, but want to make sure the actions you take will help your business leverage the upside of today’s down market.

Cut costs with care

“The first step is to stop worrying and start approaching the situation as a business problem,” says Bob Hansen, Carlson School associate professor of marketing and business-to-business marketing consultant. “Down markets are cyclical, have happened many times before, and are beyond your control. It’s key for you to realize that while you can’t control the economy, you can influence your company’s response to it.”

When costs are rising, a common corporate response is to cut back in key expense areas. “Seriously consider not implementing cost reductions in advertising and promotion, research and development, and training,” says Hansen. “These are critical drivers of business growth and an investment in your company’s future. While cutting back in these vital areas may save money in the short term, this strategy may compromise your company’s ability to exploit long-term opportunities. In a sustained downturn, however, you will need to reduce expenses in other areas in an organized, thoughtful way. For example, you might do less travel, more video conferencing, and use cheaper hotels on business trips.”

Gather internal intelligence

To create an effective downturn strategy, Hansen recommends identifying and interviewing the top three people working in each stage of customer experience for your company’s product or service. For example, talk with the top employees involved in prospecting, selling, installing and training, upkeep and service, reselling, upgrading, and cross-selling.

“These people are the eyes and ears of your organization and the closest link to what is going on with your customers,” says Hansen. “Ask them two questions. First, what do they think your major competitors will do next - cut, hold, or expand? Second, in their opinion, which customers are most important, which ones are less important, and why? Such information will provide invaluable insights into what your top customers need and what your competitors are planning. With this knowledge, you can develop a meaningful strategy for your firm. If you discover that a major competitor is cutting back on promotional spending, for example, it may be an opportune time to strengthen your company’s efforts in this area.”

Hansen adds that understanding your customer is especially important in business-to-business marketing where there are typically fewer, more concentrated pockets of customers and you are dealing with your customers’ customer issues. “Since you are working with a complex customer in a complex marketplace, it’s important to insightfully develop your strategies for responding to a market downturn,” Hansen says. “The relationships that you build with customers today are the keys to future success for your business and theirs.”

Associate Professor Bob Hansen, who teaches in our Business-to-Business Marketing program, has consulted with over 200 companies and has served as an expert witness for more than 30 trials. He serves on the boards of directors for the Fastenal Company and Minnesota Sinfonia, and teaches marketing management in the Carlson School’s part-time MBA program. The next Business-to-Business Marketing program is Sept. 30 to Oct. 2, 2008. Find more information at carlsonschool.umn.edu/execed.