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Friday
Feb102012

Recessions Need Market Creation

Does marketing work in a recession? It seems not.

For most people, the concept of marketing is to generate collateral and take it into a defined market such as a domain or territory. But suppose your assumed 'market' no longer exists?  What we need to do now we're in a recession is to create our market.

The marketing problem

We visited a company recently where the MD said, 'Our revenues are down and we're only doing a 7% margin at the moment. Other divisions in our company are doing 30-40% margin and we’re really low by comparison.'

When the MD explained his approach to marketing we soon saw the problem. 'You’re largely following the same processes you would in a boom. You're assuming there's a market out there and sending out collateral, updating your website, using social media and so on. You’re just doing the same old marketing activities.'

We grabbed his attention immediately. 'If you really want to create volume in a recession, then you must refocus all your marketing efforts into product. You need to develop solutions that create a market.'

A thriving new business for sports  

We have now developed two new businesses by creating markets where none existed before. One business, in place since May 2011, focuses on sports clubs. These clubs globally and across every sector are struggling to generate enough revenue to meet their costs. 

We began by phoning clubs to explain how we could develop a product for them to generate a new revenue stream, one they don't have today.

Clubs are now contacting us to say they have heard about our innovative solution and asking to learn more about it. We have created a market that didn't exist before. A recession demands a different approach, one that innovates to deliver something completely new. Only in this way can businesses begin to generate uplift.

A thriving new business for estate management

We often work with business owners, helping them sell their businesses and increase their return through our valuation work. These owners then walk away with millions. But they aren't always so sure what to do with this vast wealth and historically have spoken to various advisers such as tax consultants and lawyers. Our second new business is now delivering an estate product to these high wealth clients.

We have created a product to help them generate a family charter to manage their estates. Without providing investment advice, we guide people through the processes of wealth management and prepare families for the money they will receive. We launched this product about three months ago and now have accountants, lawyers and private bankers sending clients to us. 

Three months ago that estate product wasn't even on the shelf. As we work with clients, we explain the consequences of not managing their business wealth effectively and we discuss the negative impact that could occur somewhere down the track. People immediately understand the need to manage their estate for future generations. Although we are in mid-recession, we have still managed to create a new market with clients who have money and are able to pay fees.

Be more proactive

A law firm recently told us how their revenues had become fairly stagnant. When we asked what they were doing to create transactions they looked surprised. 'We just wait for the transactions to happen and then we do something about them.'


We suggested they find a client who wanted to grow their business and let us talk to them. An hour into this three-way meeting between us, the lawyers and their client we had explained how the client could expand his business. The client turned to their lawyer and said, 'Darren has told me I need to open up three new businesses. Can you do it for me?' Bingo! The lawyer immediately had more work.

This example demonstrates once again that you must create your market. You can't sit back and expect clients to walk through the door or simply wait for the market to pick up because waiting won't work these days.

Innovative product solutions

I spoke to a group of 85 people recently, which included a bank's heads of business lines in Europe.  I explained that creating a market meant innovating product solutions that currently aren't being packaged into a particular market.


The only way to sell today is through a 'solution' sale, not a straight product sale or an up-sell. It's no longer effective to try selling more of what you have or cross-selling. It's now about creating something completely new and taking it out as a solution to problems people may or may not be aware of yet. 

Around the room all heads nodded furiously as people agreed this was the way forward. 

Without this new understanding and innovation-focused thought processes inside a business, many companies will simply stagnate. Those businesses that are growing are those constantly innovating.
We know that marketing works in a boom, but we believe it doesn't work well in a recession because a recession demands far more innovation. And it's not about innovative marketing, but rather new product packaging and new product solutions. Creating your market will only work from the product end. 

 

If you enjoyed this article, then follow Shirlaws on Twitter, or come along to one of our introductory New Perspectives workshops.

 

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