By Writuparna Kakati

Are we in a recession? No. Will there be a recession in 2009 ? Probably not. But India's corporate optimism has started to sink on worries about the global economic downturn, high cost of credit, reduced availability of funds, weakening demand and exports slump.

So, let us assume that our economy will be in a recession in 2009-10 and that as marketers we need to work within that reality.  

When it comes to SMEs (Small and Medium Businesses), the relationship between economic environment and business strategy is very significant since even some small changes in the economic environment or market tend to have far-reaching effects upon these businesses. So, what should our SMEs (Small and Medium Businesses) do in this scenario?  Smart athletes often choose to increase their pace on hills; it is when they sense the existence of a great opportunity in the form of fatigued opponents. The same can be said of smart businesses when they enter a recessionary phase of economy. A recession is the best time for businesses to start their marketing efforts afresh.

So, a recession requires SMEs to modify their marketing strategies. But how ? Let's discuss some smart marketing ideas that can make your business recession proof-

1. Market research: When there is an economic slowdown or a recession, consumers start redefining value: they value their every rupee, ask themselves how much they will benefit by purchasing a certain product or service, negotiate harder than ever before, buy less or postpone purchases. They tend to look for trusted brands while interest in new brands fades. To face such challenges successfully, SMEs need to know more about their consumers and how they are redefining value during a recessionary phase of economy. So, it is not the right time for SMEs to cut their market research budget during a recession. Instead you should double the budget, analysis the changing trends carefully, and change your marketing strategies accordingly.  (Also read our story: Marketing research: A must for businesses)

2. Analysis market segments: In a recessionary phase of economy, not all business segments suffer equally; some suffer more, some less, some not at all. In the current economic slowdown in India, for example, only a few business segments like textiles, housing & real estate, and especially the export based businesses have been worst hit while some other segments have not been feeling the downturn so much acutely. To grab opportunity during a recession, a business must find out and understand the market segments which are least hit or less prone to an economic crunch. There may be enough opportunities in some segments which are till now only the secondary focus of your business.

3. Emphasize on advertising:  In a study of the the 1981-82 recession in the United States, McGraw Hill Research analyzed 600 B2B companies in 16 different industries. The results revealed that companies which maintained or increased their advertising expenditures during the period averaged significantly higher sales growth not only during the recession period but even for the following three years. Several other researches reveal that businesses that continue their advertising and promotional campaigns during hard economic times perform better. When competitors are cutting back on advertising, increasing advertising during a recession can improve market share and return on investment to a significant level and that too at comparatively lower cost. (Also read our stories: Ride the storm in a downturn; Recession proof your business, beat the downturn)

4. Pricing: When you offer your products or services at some 'great' reduced prices all of a sudden, it is most likely that your sales will soar as an immediate effect. But it is not a very good idea, especially for a SME with a small budget. Instead, SMEs should consider adding more value to your customers and launching some temporary price reduction strategies such as offering quantity discounts, extend credit to long-standing customers, etc. But again you should be cautious in implementing this type of strategies as it might make customer think later (one day the recession will be over) that your products or services are overpriced.

5. Increase market share: How can SMEs transform an economic slowdown into a great opportunity? Just by increasing their market share. As the the competitors are cowering down and waiting the storm out, now is the time for businesses to increase their market share. However, it is not always possible for SMEs to invest or go for acquisitions in turbulent times. But they can make the best of their customer base selling more to existing customers and increasing their average spend. It is also important to maintain the quality of your products or services during a slowdown period even though sales fall off. (Also read our story: Increase your market share to break the back of the beast)

6. Reorganize product portfolio: What sells during an economic crunch? Historically, sales of luxury goods are suffered while sales of basic goods remain unaffected. Although it is partially true, businesses need to realize that there are some other crucial factors which need to be considered carefully while preparing their marketing strategy for a recessionary period of economy. During a recession, people prefer cost effective products to costly solutions; multipurpose products to specialized goods, separately priced unbundled products to costly bundled packages. Also remember that innovative products can play a very crucial role in translating the moments of uncertainty into moments of glory.

7. Spend smart: Needless to say, when you have less pennies in your pocket, it is most important to review your expenses. During an economic slowdown, a business must carefully identify which marketing costs are yielding improvements to their profitability and market share and which are not. When a recession strikes many businesses cut their budgets and people in marketing disproportionately and neglect some crucial marketing strategies such as advertising, branding, targeted communications, etc. It is a self destructive measure for businesses, especially for SMEs as they are usually equipped with limited resources and manpower.  

History is the witness to testify that businesses which enter a recession with a pre-established strategic emphasis on marketing are well positioned to boost their competitive advantage. A recession is a labyrinth of both crisis and opportunities, and the winners will be those who put their thinking cap better. We do not know exactly what awaits our SMEs just yet. The current slowdown in Indian economy might or might not usher in a recession in the coming days of 2009. But our SMEs should prepare for the worst.

Wish you all a happy and successful NEW YEAR.