Do you find that the news has you hunkering down this year? Maybe thinking, “You know, if we can just meet last year’s numbers, that’ll be a win!”
If so, you’re not alone. Based on everything you and I are hearing in the news, it would be easy to think, “This is going to be a tough year. No one’s going to do well. If I/we can just survive this year, we’ll be okay.” It would also be easy to think, “The only way to survive a downturn like this is to cut costs or reduce expenses.“
However, that’s exactly opposite the kind of thinking you and I need to be engaged in if we want to grow our businesses. We grow by growing, not by cutting. By definition, if all we’re doing is cutting expenses, we’re continuing to do what we’ve done before, just at a lower price point. However, if we want to grow, then we’ve got to buck the current national trend and invest more–not less.
A McGraw-Hill study of 600 US companies found that those who ”maintained or increased their advertising expenditures,“ during the 1981-82 recession (the last great recession), ”had significantly higher sales growth.“ ”How high?“ you ask. Well, those companies that were, ”aggressive advertisers,“ during those recession years ”were 256 percent higher [in revenues] than those that did not keep up their advertising.“
Need more proof? A Coopers & Lybrand study concluded that, ”Businesses that maintain aggressive marketing programs during a recession outperform companies that rely more on cost-cutting measures. A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery.“
However, it’s not just marketing that requires that you and me to buck the cost-cutting trend–it’s also R & D/innovation. In fact, last week’s Business Week (2/9/09) edition ran a graph on page 60 looking at, ”The Rewards of Research.“ The study they graphed looked at 177 companies that increased their investment in R & D by over 100% during the economic downturn years of 2001 and 2002.
They then looked at their cumulative increases in share price from Dec. 31, 2002 on and guess what they found?
At the one, three, and five year marks, the companies that invested aggressively in new ideas, when everyone else was cutting, had double the returns over the S & P index (51% vs. 26% by year one, 88% vs. 42% by year three and 136% vs. 67% by year five).
In other words, if you want to double your revenue, fight the trend towards cost-cutting. There’s nothing wrong with eliminating waste, but cutting expenses doesn’t grow a company. Investing more in areas like advertising and marketing, or investing more in creating innovative solutions to the problems your customers are facing–those are the actions of market leaders.
Plus, when you invest more now, for example in marketing, you’re way ahead of the game because almost everyone else is cutting their marketing and ad budgets–which means you stick out more. Or if you invest more in R & D now, you’ll end up taking market share because you’re the one with cutting edge ideas while ”everyone else” is behind the eight ball–and even more so when the economy does turn around (i.e. they’ll be late to the party instead of you).
So, as you look at your company, what are you doing to buck the trend this year? If you’ve been giving in to the cost-cutting mindset that the news media suggests, why don’t you take some time today to figure out how can you increase your investments in areas like marketing and R & D this year–that is, if you want to double your revenues :-)
In other words, refuse to give in to the recession blues. Let others do that. Instead, why don’t you decide to make this year your best! As I frequently say, “Your best years are not behind you. They’re in front of you!”
P.S. If you need help figuring out how to take your marketing to the next level, make sure you contact me at email@example.com
P.P.S. This can be a great executive team discussion piece. Using those three studies about, “What do we believe grows a company?” And, “How can we best utilize our resources to accelerate the growth of this business/organization?”