These are challenging times for businesses. The world economy is in turmoil and its impact is being witnessed in industries worldwide. Businesses - small and big - are struggling to recoup difficult losses by cost-cutting measures. Sales and exports are low, overseas orders are shrinking and even small retailers are struggling to clear their shelves.

What should businesses do in such flat lining economy ? The situation is tough and it is human nature to hunker down whenever in trouble. But is it a good business strategy ? Or should we try to build our nests bigger and fly away in search of more food? Several researches have revealed that moments of economic slowdown provide businesses with perfect opportunities for growth - to start new ventures, launch new products, and strengthen their market presence. When the going gets tough, it is the toughs who innovate - that is what all businesses should do to translate the moments of uncertainty into moments of glory. Let's see how  -

Innovation
Innovation is the keyword to success during an economic slowdown. Listen to the market - what is it speaking to you? There is less crowd, less competition, and more opportunities.

A period of economic downturn presents unusual opportunity for businesses as the barriers come down opening up new ways to move forward. Let's take some motivation from the pages of history. During the Great Depression (1929-1930s), many business leaders laid the groundwork for decades of success: Douglas Aircraft Company debuted the DC-3 which revolutionized air transport in the 1930s and 1940s; IBM's founder Thomas Watson built a new research center; Galvin brothers founded Galvin Manufacturing Corporation in 1928; Charles Revson along with his brothers launched Revlon in 1932; and all of them succeeded. This does not mean that these big ideas emerged because of the Great Depression, but a global money drought helped the businesses to bloom.

That is how smart leaders face challenges- they take advantage of  the dark days; when others quit listening to the market, the eagerly listen; when others stop research and development, they pull back; when others stop innovating, they innovate.

Communication
When there is an economic slowdown, the worst thing some businesses do is that they cut back communication and disappear from the marketing perspective. They start neglecting communicating with their existing and potential customers who, as a result, start thinking that the business is in trouble. Their absences turn out to be their greatest presence, and their clients turn to other  suppliers.

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. There are many other examples in history that show that businesses that continue their advertising and promotional campaigns during hard economic times perform better; current and future sales of a business are jeopardized when it cuts their advertising cost during financial crunch.  

Downturn period is the best time to promote your brand; you need not to spend a lot to get a lot of attention as there remain less "noise" and congestion (fewer advertisers) in the marketplace when economic slowdown looms. 
 
Reducing price
Reduce your prices in a recession? This is a huge mistake small business frequently commit mimicking large corporations.

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 sooner or later the downturn will be over; you will have to sell your products at normal price and it is when your customers cannot not help but think that if one can survive an economic slowdown with a huge price difference, are the products overpriced. Your customers will question your honesty. Another problem with price reduction is that small businesses usually have a small budget, where does the price cut come from ? It is a two edged sword.

Price cutting a not a good solution to fight difficult economic times. The ideal thing to do is to add more value to your customers. When an economy faces slowdown, every rupee matters to consumers and they use greater discretion in making purchasing decisions. If your products are not extraordinary, consumers are not easily going to buy from you.  

Customer loyalty
A few businesses really understand how customer experience affects their bottom line. During recession, most of them abandon customer experience efforts as they are not sure whether their businesses will be rewarded or not with stronger customer loyalty. Again, it is a negative approach of doing business during a downturn.

Focusing on customer needs is not easy during a meltdown as management has to keep itself busy more on finance.   But if a business can champion the value of customer needs when consumer sentiment is low, it can easily strengthen its relationship with customers. Let us see some examples:  in 2003 when the US stock market was facing great trouble, many companies chose to downsize but Apple Inc. didn't. They neither reduced their R&D activities nor lowered the quality of their customer support services. Instead, the company  turned out more new products, and the result was that they did a good business while their competitors were struggling to recoup difficult losses.      

So, now is the right time for businesses to show the consumers that they are stable enough. Even if the country's economy sinks into recession, they will be able to withstand the hard times.
  
Grabbing market share
How can you transform an economic slowdown into a great opportunity. Just increase your market share. As your competitors are cowering down and waiting the storm out, now is the time to increase your market share.

After the recession of 1990-1991 in the US economy, McKinsey & Company performed a study of 1,000 companies on the effect of increasing market share during an 18-year period (1982-1999). The study found that only those businesses retained or gained market leadership which had opted to pursue new opportunities and invested cash reserves on strategic acquisitions during the recession period. Downturn provided those businesses the opportunity to widen the gap between them and their competitors.

However, it is not always possible for small and medium businesses 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 one's products or services during a slowdown period even though sales fall off.

Good cost vs bad cost
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 are 'bad costs' and which are 'good costs'. Good costs are those that yield improvements to profitability and market share while bad costs do not.

How can one distinguish between good costs and bad costs? Let's take an example: Gillette launched its Gillette Sensor brand of shaving products in 1990 (during the 1990-91 recession period); by 1997 more than 8 billion Sensor razor blade cartridges and 400 million Sensors razors were sold. This kind of costs in innovation can be termed as 'good costs' while investments in things such as general and administrative expenses, fixed and working capital or on manufacturing can be termed as 'bad costs' even when they are intended to yield cost competitiveness or improve productivity .

It is not always possible to categorize all investments as 'good' or 'bad' as situation may vary from business to business. For example, investment in activities such as outsourcing, price reduction may prove beneficial for some businesses during an economic slowdown while the same strategies may do just the opposite when implemented by some others. Businesses, therefore, need to analysis the market situation carefully before investing in such activities.

According to Robert Miller, co-founder of Miller Heiman and a renowned global sales practitioner, there are three stages of a downturn, "when there are storm clouds on the horizon, as the first signs of trouble appear; when it is wet and rainy weather, when sales plunge; and when the first rays of sunshine appear, when customers start to increase their buying again." Going by this definition, we can view that India is not yet in a recession and till now only the first signs of trouble have appeared. We don't know whether there will be or will not be a recession; but when prices rise, factory orders drop, and other economic indicators signal rough times, it is better to prepare ourselves for the worst situation. Hence, it is the right time for our businesses to unleash corporate creativity.