Perspective

Emerge Stronger From A Crisis

Five Near-Term Moves to Accelerate Growth

This article was first published by on March 13, 2020.

Businesses must act swiftly during a crisis to maintain near-term viability. But it can be tempting to overreact and focus too much on cutting costs to preserve cash. This is rarely the best path to ensure long-term success.

The companies that come out of a crisis in the best shape and outperform their peers are those that have thought strategically. Their playbooks combine prudent and necessary cost cutting actions with longer-term, commercially-focused measures to bolster customer relationships and invest for the future.

There is no single formula that works for all companies and industries. However, the following principles – all focused on the top line – can serve as a guide to a balanced plan of attack:

1. Double Down On Your Best Customers – And Prospective Customers

Resources are inevitably constrained during a crisis, so it is critical to allocate them with purpose: Which customers will receive shipments when inventory is limited? Which should receive extended payment terms if needed?

Investments today that support a valued customer’s operations in the crisis will strengthen the relationship with them – and pay dividends for years to come as the customer, too, emerges stronger. First, it is necessary to understand customer economics. This should be followed by a segmentation-and-targeting strategy focused on the most valuable current and prospective relationships.

2. Avoid Permanent, Margin-Destruction Discounting

To stimulate demand during a crisis, it can be tempting to discount, discount, discount. Of course, competitiveness is paramount, and price plays a key role. But it is critically important to adjust prices in ways that avoid long-term – or even permanent – erosion of margins. Across-the-board price cuts rarely make sense given that different customers – and customer segments – will respond differently to similar discounts: Their price sensitivities will vary, as will their perceptions of discounts.

Instead, a pricing and discounting strategy needs to be more nuanced. Discounts should be targeted at and tailored to different customer segments in a way that stimulates profitable incremental revenue – that is, net positive economics. They should also be tied to the development of long-term customer loyalty: Lower prices can be offered in exchange for long-term contracts or volume commitments.

It is important to make discounts temporary – for example 10 percent of a list price for three months. They should be coordinated with other demand-stimulating policies – such as flexible terms and free shipping – to ensure that the stacked discounts and benefits are not unprofitable in aggregate. Discounts should also be aligned with operations and the supply chain as a tactic to alleviate potential constraints. That means, for instance, not overly discounting products that are already in short supply.

To manage through a crisis, companies and leaders must be willing to balance necessary cost-containment maneuvers with strategic, commercial actions focused on the top-line

3.Adjust Commercial Resources To Reflect Shifting Demand.

Demand patterns will, inevitably, change both during and after a crisis. Customer values and purchasing behaviors will alter: They might need different products and services, and demand quality or premium brands. Channel preferences and mix could alter too, perhaps towards online and over-the phone interactions, and away from face-to-face contact. And demand will fluctuate geographically, as countries and regions recover at different rates.

Businesses can use these shifts as an opportunity to upgrade the performance of their commercial organizations if they respond flexibly and address both internal teams and external partners. They can prune underperforming sales reps and redeploy the remaining team to the most promising opportunities in different geographies, customer segments, and product segments. They might place greater emphasis on inside sales over other sales channels, if travel and face-to-face interactions are less desirable. Lead-generation resources should be reallocated from low-yield to higher-yield tactics in order to maximize return on investment. And focus should be kept on the best customer segments in the most promising geographies and on products and services that are aligned to shifting demand and customer needs.

Close coordination with supply-chain and procurement partners is needed to lock in alternative sources of supply and rebalance inventory for shifting demand: “You can’t sell it if you don’t have it.” This may also be the right time to re-evaluate the performance of channel partners, distributors, and intermediates. The network can then be adjusted in a way that strengthens the most successful relationships. These moves will likely imply an adjustment of sales targets and short-term incentives to keep the best resources and partners highly focused and motivated to succeed in the new environment.

4.Adapt Marketing To The New Circumstances

If marketing budgets need to be dialed back and customer needs are evolving quickly, it is important to be flexible and focused on customers. The objectives remain the same – to raise brand awareness; send customers the right message through the right channel at the right time; deliver an excellent experience; and strengthen customer relationships. But there is now an opportunity to coordinate marketing efforts and nimbly adapt to evolving customer needs.

Social media presence and customer response resources can be ramped up to address crisis-related issues. Proactive outbound communication and rapid inbound response enable a company to get out in front and address concerns quickly, thus preserving customer confidence. Innovative digital communication is a way to reach consumers and employees who increasingly stay home. In China, live video streaming and social media activities have been increased to promote products online. Companies should prepare digital marketing plans so that they are ready to go on a variety of channels and in multiple languages. It is also a time to explore whether customer journeys can be improved through other channels – digital, self-service, and remote – at more touchpoints.

Loyalty and key account programs can be adapted to reflect changing buying behaviors and incentivize long-term loyalty: Rebates and volume discounts, for example, will help to retain and connect with customers. Companies should reassure their best customers that their status and benefits will not be at risk if they cease certain activities during the crisis. Marketing leaders can use a crisis to reinforce a customer-first mindset that responds and adapts quickly to rapidly-evolving needs.

5.Seek Opportunistic Inorganic Growth

A crisis often presents rare opportunities for good-value acquisitions. These can provide ways to enter new markets and geographies; introduce new products and services to align with shifting customer needs; or simply increase the scale of the business and acquire more customers.

Regardless of the strategic intent, acquisitions require a balance. Investment should be disciplined – to ensure the fit and valuation are right; and it should also be opportunistic – carried out with a mindset to position the company for long-term success and accelerate growth after the crisis.

Managing through a crisis can be scary, and surviving involves a host of critical decisions. But a crisis also presents long-term opportunities to emerge stronger. To do so, companies and leaders must be willing to balance necessary cost-containment maneuvers with strategic, commercial actions focused on the top line.