Don’t retreat! Be progressive and own the upside when the economy recovers

Eric Meerschaert

Eric Meerschaert

Executive Director of Strategy

Eric has a deep background of marketing leadership at Global 500 software companies, and was President of Click Commerce. His strategy roots grow from McKinsey & Co, where he learned that analytics, not instincts, drive the best corporate and market strategies.

The following is adapted from a webinar presented during the 2020 virtual HITMC conference.

Don’t retreat! Be progressive and own the upside when the economy recovers

When this situation turns around—and it will—which B2B brands will see their market share, growth rates and earnings surge back strongest?

To answer that question, it’s helpful to look at what happened the last time the world’s economy suffered a devastating downturn—the financial collapse and “Great Recession” of 2007-2009.

Fortunately, that’s exactly what the Harvard Business Review (HBR) did in a landmark 2010 study: Roaring Out of Recession. That study found that companies who took a “progressive” approach outperformed all others by at least 10% in both sales and earnings.

What is this “progressive” approach? And how can your brand apply it during this uncertain time to own the upside when the economy improves?

What is a “progressive” approach?

First, some definitions. The HBR study analyzed 4,700 public companies and broke them into four categories based on their responses to the recession:

  • Prevention-focused companies, more concerned with avoiding losses and minimizing downside risks
  • Promotion-focused companies, which invested more in offensive moves
  • Pragmatic companies, which combined defensive and offensive moves
  • Progressive companies, which deployed the optimal combination of defense and offense

Here’s how those companies fared:

Roaring Out of Recession

Now you’re probably thinking, Well of course I want to deploy “the optimal combination of defense and offense,” but how on earth do I figure out what “optimal” is?

There’s no easy answer to that question, and the answer will be different for every market and every company. But we can tell you where the answer starts.

It starts with your own customer data.

Dig into your outliers to reveal your distinctive advantage.

The progressive approach involves doubling down on a focused, distinctive new position in your market, and it’s actually the least risky and most profitable approach to coming out of a recession.

But first, you have to know what your distinctive advantage is, and it might not be what you think it is. What’s more, you can’t rely on your champions to tell you. In fact, looking at—and talking to—your biggest and best customers is guaranteed not to reveal your distinctive advantage. They’ll only tell you what you already know.

Instead, dig into your outliers. Learn from your value leaders—the ones who deliver the highest revenue for their size.

Account Execution in Specific Markets

If you plot your customers by revenue and size, you’ll see a general trend up and to the right (the black dots). That’s normal—bigger customers tend to have more money to spend. But what about those outliers (the red dots) who are relatively small but bring in relatively large revenues? They are spending far more with you than their size suggests they should, which means you must be offering something that they really, really like.

Those are the customers you need to talk to!

Understanding your true value leaders will tell you more about how to grow wallet share than talking with your favorite or merely your biggest customers. Learn why they buy proportionally more for their size and how to use new offers to move the needle at each account, then use that information to guide investment in the offerings that can pull each of your customers on the trend line upward to the same level of spending.

Highly targeted ABM is a very tactical powerful play here, leveraging your distinct advantage and offers of help. Those green arrows? That’s where your sales and earnings growth will come from when the slowdown ends.

Rebuild your marketing budget from the bottom up.

Reality check!

It’s a recession. A bad one. Your marketing budget has probably been cut, or it soon will be. So where are you supposed to find the money to invest in new or significantly retargeted offerings?

You’ll find it by rebuilding your marketing budget from the bottom up, based on an analytical understanding of wallet share behavior. Then you can divide up your remaining budget and recast your approach top down.

Rebuild your marketing budget from the bottom up.

Whatever budget you still have, we’d suggest dedicating 80% of it to focus on your distinct advantage. You’ll start with your existing customers, of course, because increasing customer retention or wallet share by 5% increases profits 25%-95% more than new customer sales of the same amount. Then you can extend that momentum to strategic acquisition targets.

You can’t completely abandon brand promotion—you still need to remind customers how important they are—but under these circumstances brand probably shouldn’t demand more than 20% of your budget. (These ratios apply to B2B businesses smaller than $5 billion or so in revenue—they will vary more for consumer or much larger companies.)

In times like these, you have to deploy an explicit strategy (and the bulk of your budget) to leverage your best assets.

Where’s the darn puck going?

Hockey Puck

That Wayne Gretzky quote about skating to where the puck is going is one of the most overused and abused clichés in modern marketing. Everyone wants to skate to where the puck is going—the trick is acquiring the vision to do it.

And that’s never been more difficult than it is right now. We’re entering an era of continual and potentially rapid change for the next 12-24 months. To share a single example from the world of healthcare IT—the idea of telemedicine has been around for years, but all of a sudden it’s the new front door to mainstream healthcare.

Your old teams and methods for market prognostication won’t be sufficient for this unprecedented period. You need to hear from everyone, and you need to hear from them often. We suggest a biweekly standup attended by people from marketing, sales, product management and R&D to discuss what’s winning and how customers are talking about it.

Combine this steady influx of information with what you learn from your true value leaders, and deploy a bottom-up strategy to leverage your resources behind the offerings that can generate the biggest wallet share from your biggest customers.

Or, to put it in hockey terms, don’t just skate to where the puck is going. Pass the puck to yourself.

That’s how progressive brands win the upside when the economy recovers.

Use the quick form below to contact us today if you’d like to learn more or see examples of how we’ve helped clients drive greater results.

Eric Meerschaert

Eric Meerschaert

Executive Director of Strategy

Eric has a deep background of marketing leadership at Global 500 software companies, and was President of Click Commerce. His strategy roots grow from McKinsey & Co, where he learned that analytics, not instincts, drive the best corporate and market strategies.

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