The Small Business Association reports that 4 out of 5 businesses go out of business within the first 2 years.  During a recession, the mortality rate of a new business is even greater.  The primary deficiency among smaller, newer businesses is that owners simply lack the experience and planning skills necessary to stay solvent.  For many, the only business management experience they possess is their own within those pain first 2 years.  But marketing lessons can be learned from others mistakes.  If you pay attention to the right competition, you’ll grab market share of those businesses wearing blinders.

Take inventory of the competition within your market
Start by making a list of your competition.  Include all the businesses that provide a product or service to your existing customers and prospects, or those who provide something that would cause your customers or prospects to stop using your product all together.

Examine your competitions position within the market.  Ask yourself, how are they differentiating themselves from you and the others?  Which business(s) dominate the market?  What type of marketing mediums do they use consistently?  What message appears to work better than others?  Ask others what they see and recall?  Document not just the market leaders but those businesses which test various mediums and messages.  Try to remain as objective as possible in your assessment and remember that all the competition face the same challenges in growing their businesses.  It’s safe to assume that if a campaign is short lived, it’s likely not generated enough sales to support itself in the long run.  Over time you’ll be able to learn which marketing campaigns produce a positive ROI and which ones are scrapped.  As dynamic and daunting task as this sounds, it’s far less painful than investing blindly into a bad campaigns that ultimately do not produce.

Divide your competitors into 3 segments
For starters, you may want to consider segmenting your competition into 3 categories.  This will help you know where to focus most of your attention.

Established and Well Branded – These are the businesses which have been around forever, have a loyal following, and strong financial backing.  These businesses have spent a great deal of money and time and growing their business.  Depending on the business you’re in, you may not have the same results in advertisement as they do because their name alone carries more brand recognition and thus drives sales.  What you want to do is pay attention to what they spend their marketing dollars on.  Likely they will not be wasting any of it on the wrong marketing because mature businesses have learned how to market their business years ago.  How does your current marketing compare to theirs?  Are they ever using direct mail to reach their audience?  What about the print space, radio, and television?

Quick Start – These are the businesses which are attracting new customers by doing the right things out of the gate.  They’ve not only got a solid plan to reach their new prospects, they also have a well oiled system to service them.  These are the businesses you want to focus most of your attention on.  If you are under capitalized, focus on parts of their marketing you can afford that will best resonate with your ideal customer.

Under Capitalized – These businesses may be new or old.  They’re in business and float along aimlessly without penetrating any new market share.  They will likely not make it through a recessionary downturn as they’re ill prepared for navigating through hardship.  Because they’re poor planners, they’re also unable to convince the bank to lend them money and will likely leave their vendors holding the bag.  These are also important to watch for two reasons; what not to do, and how you might connect with their few remaining customers before they close their doors.

Separating your competitors in this way will help you see which ones threaten your market share from those which neglect their customers and offer opportunity to grow it.

What have you learned?
One important observation you should make is how the bigger players within your market position themselves amongst the rest.  And those who don’t make an effort to differentiate will likely loose customers randomly to other competitors.  In an ideal market, there would be just as many different kinds of businesses as there are different consumers.  In most markets there are fewer businesses all attempting to satisfy the greatest consumer base.  When the marketing budget can afford it, bigger businesses themselves serve multiple segments to satisfy multiple buyers.

You’ll also find that the smartest businesses using multiple mediums, say television, direct mail, and print space, will attempt to deliver a uniform message along all three channels.  To be efficient, the message is projected in the same geographic market.  This uniformity is important to reinforcing your message.  Careful planning is required to ensure that the investment along all three channels has consistent offers and creative copy.  And that the timing of what they offer works with creating the greatest impact.  Some businesses will attempt to test pricing discounts through a radio commercial and unique feature of product through a newspaper print ad.  The inconsistency is confusing to the consumer and the brand gets lost in the mix to better positioned competitors.

So let’s say you’ve got family and friends all keeping an eye out for you.  They’re clipping the competitions coupons, saving email ads, direct mail, flyers and the like.  They’re also taking notes on telemarketing calls coming in, people stopping by their business or front door, and of oversized bus wraps with giant pictures.  You begin amassing your collection and begin drawing conclusions.  You may see that some “Established and Well Branded” competitors consistently use direct mail and offer lower significant discounted pricing.  You may also find that some of the “Quick Start” competitors are all in the phone book with quarter page adds all boasting high quality products.  And you may also see that several “Under Capitalized” competitors confuse their customers with multiple messages over multiple mediums.

Unless you can truly deliver a discounted cost that will compete with the attention of the “Established and Well Branded”, it’s not wise to place your marketing investment in that area.  Depending on your budget, you many want to mimic some of the “Quick Start” approaches in running a yellow page add of equal size but differentiated positioning.  It’s difficult to get too specific when talking about all industries in general, but the point here is that your competitors can teach you about what to do and more importantly about what not to do.  The longer you watch the competition in this fashion, the more you will learn from them.  And never assume something will work for you just because the competition is doing it.  Everything you do for the first time should be considered a test.  Carefully give it your very best shot and measure the results.  If yellow pages draw $60,000 in new profit per year at a cost of $15,000, it’s likely you will have the same results the next year.  Increasing the size of the ad space doesn’t guarantee a proportional increase in profits.

During a recession, everything changes
Now that you’re established and you’re well on your way to growing your market share, the economy takes a turn for the worse.  You’ve established your position among the other top competitors in your market, but the market as a whole begins to shrink.  This is where you must keep one eye on the competition, and the other on your existing customers.  Again, depending on the industry you’re in and how well you position yourself, holding onto your customers can be a challenge.

Here are some things you should know people behave differently during a down market.

•    Many people change how they value what they buy.
•    People look for value over abundance.
•    People consider time as a factor.
•    People don’t like gimmicks.
•    People are more sober shoppers.
•    People have a better sense of what they want and what they need.
•    People look to escape, even if only for a little while.
•    People relocate.
•    People price compare.
•    People care what others think about their abundance of spending.
•    People read the contracts.
•    People hesitate and take longer to purchase.

Given the above list, you will find many of your competitors making adjustments to their message.  They may change their traditional, long standing marketing medium to cut costs and fine tune offer.  The first marketing they stop is likely one that’s overpriced and not resulting in new business.

Generally speaking, a recession is a terrible time to stop advertising.  Those who do stop signal they are suffering.  These businesses are the ones that will suffer the largest migration of customers.  And this is where you can position yourself to fill the void.

Again, depending on your budget, you want to be sure you’re communicating to your existing customers first.  These consumers are truly your best spent investment.  Guarding them is the key to surviving the economic “storm”.  But if you can afford to reach out to the market for new business, now is the time.  The message must be relevant and strong.  If you’re going to offer a discount, make it one worthy of considering.  If you offer exceptional service, focus on that value as a benefit during this economic day and time.  If your product is more expensive but definitely superior, consider the audience and make sure that audience still values your product as they did before.  If not, consider changing the audience to fit the times.

It’s important to have a healthy life-time value mix of customers.  The larger businesses got to where they are by listening to the market and learning from mistakes.  To use a vegetable garden analogy, your marketing mix should be spend nurturing younger seedlings, harvesting the low hanging fruit, and pulling weeds.  All things being equal, the more balanced the mix, the safer your business will be during a recession.

Over time, as you learn what these bigger, more successful business do right, you’ll also start noticing where the others are making mistakes.  This information is invaluable to the smaller, newer business.  Take notice of those with good fortune and those making mistakes, and invest your precious marketing dollars wisely.

Tags: Marketing during a recession, Small Business Marketing, small business planning
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