While lowering the cost to human life remains of utmost importance during the COVID-19 outbreak, the virus is also fiercely impacting businesses across the globe. In the United States 17 million people, 10% of the workforce, filed for unemployment in a three-week period, and the OECD projects world GDP growth will fall to 2.4% in 2020.
Lacking the deep pockets and credit lines that more established corporations can fall back on during times of economic disruption, the startup community will surely be jarred by the rocky economic road ahead.
While taking stock of company assets and liabilities, founders may be inclined to drastically decrease marketing spend, reactionarily pivot their core marketing strategies, or cut out their marketing initiatives entirely. This would be a mistake.
Companies would be wise to stick to long-term marketing strategies that work. Remaining consistent, and making small adaptations to long-term marketing strategy is no easy task, however.
Here are three areas entrepreneurs should consider in their efforts to remain true to their brands and come out stronger on the other side of this crisis.
“Use a scalpel not a sledgehammer” on your long-term marketing budget
Rand Fishkin, founder of inbound-marketing software firm Moz and market research startup SparkToro, recently tweeted: “Have to make marketing cuts? Don’t use a sledgehammer, use a scalpel. Otherwise you could cut revenue-generating channels and spend… Revenue that’s saving people’s jobs.”
Mr. Fishkin’s statement makes sense. Startups should analyze all of their marketing channels and the performance levels of each to make informed decisions about which long-term marketing strategies will continue to work during a recession, and which can be scaled back or re-tooled.
Companies that lower advertising budgets — or eliminate them altogether — during a recession put themselves at risk when economic uncertainty subsides.
An analysis using data from the Profit Impact of Market Strategies (PIMS) database, a comprehensive, long-term study of strategic business units (SBUs) in thousands of companies, showed that businesses that lowered ad spend during a recession saw “sales and income fall by 20-30% over the next two years as a result,” according to AdWeek.
On the contrary, John Quelch, Dean of the Miami Herbert Business School at the University of Miami and Katherine E. Jocz, former VP of Research Operations at the Marketing Science Institute, found that increases in marketing spend by businesses during recessions have “boosted financial performance throughout the year following the recession.” Furthermore, analysis of the PIMS database by marketing experts Alexander L. Biel and Stephen King found that businesses which increased ad spend during a recession increased their market share as the recession subsided.
Startups with low access to capital may find it more difficult to aggressively market during an economic slump, but by remaining calm and analyzing channels that provide positive ROI for the company, founders can better direct resources.
For startups with little-to-no marketing budget, there are other options to cut costs including partnering with a non-competing brand in a separate product category that targets the same consumer segment as your company to share advertising costs, and internal content creation on your own website’s blog.
There are also funding options via accelerators such as Y Combinator and 500 Startups, in addition to competitions with potential investors such as the SXSW Pitch in 2021 or Tech5, organized by Adyen and TNW. If your company is performing well in the downturn, be sure to communicate that to investors too.
The worst thing a company can do during a downturn is go completely dark.
Focus marketing efforts on core products and customers
During times of economic uncertainty, entrepreneurs could be forgiven for completely re-focusing their marketing strategy, product lines, or even customer base, in an effort to make much-needed but nevertheless short-term gains. (To be clear, this does not refer to the thousands of businesses who have graciously re-tooled their operations to provide much needed personal protective equipment (PPE) to healthcare workers fighting COVID-19).
This strategy is shortsighted and could prove detrimental. Instead, entrepreneurs and marketers should focus on the value proposition of core products and double down on marketing efforts to key customers and market segments.
HubSpot, a publicly traded marketing software company, was just two years old when the 2008 recession hit. According to their first sales person, Mark Roberge, their biggest challenge during that crisis was communicating that HubSpot wasn’t just a “nice to have” product, but rather a “must have” one. By centering attention on its core product’s value proposition (“more quality sales leads”), and not being lured in by short-term gains, Mr. Roberge and the rest of his team were able to lead the company out of the recession and continue to snatch up market share.
Companies that offer a range of products or services should take stock of experimental or low-performing product lines, and consider pausing marketing initiatives for these in order to focus long-term marketing efforts on products or services core to the company.
Additionally, during tough economic times, it is wise for entrepreneurs to recall that it costs less to keep a current customer happy than to find a new one. Furthermore, Mr. Quelch and Ms. Jocz remind businesses that “loyal customers are the primary, enduring source of cash flow and organic growth,” and should focus their marketing efforts on them accordingly in a downturn. Silicon Valley business coach Barbara Shannon is telling her clients that there is a tremendous opportunity right now to build lasting trust with their communities, and Invest Ottawa, an economic development agency for the tech sector in Canada’s capital, is reaching out to community businesses impacted by COVID-19 with resources in a show of solidarity.
Part of keeping loyal customers engaged in the time of COVID-19 will mean being empathetic to their current financial situations. Startups, especially those that provide products or services to their peers, should be cognizant of the new economic realities of their core customer base and strive to fulfill the old Silicon Valley ethos of providing more value than you ask for in return — that value proposition should be conveyed in your marketing campaigns as well.
Communicating your appreciation to loyal customers through promotions or referral programs can help establish trust and ensure their allegiance when times are good again. However founders must be aware that excessive discounts can lead customers to devalue your product in their minds, negatively impacting their willingness to pay more when prices return to normal.
Organizations such as WeWork Labs have introduced programs in recent years to improve loyalty, with the goal of having startups grow and remain active with WeWork at various stages of their lives.
Companies that aren’t distracted by short-term marketing gains for non-essential products and focus their limited marketing resources on conveying the value of core products to their loyal customer base will be better positioned for success as soon as the economic situation rebounds.
Keeping your eye on the long-term doesn’t mean ignoring the short-term
Startups would do a disservice to themselves and to society if they completely ignored the COVID-19 outbreak and its devastation in their marketing and communications strategies. We’re not robots and nor should we be.
Part of being engaged with customers who are facing new realities amid the crisis is sharing your experience and expertise while remaining sensitive to the changing needs and emotions of people during these uncertain times.
If founders are going to conduct marketing related to COVID-19 — which is totally ok but should not supplant long-term strategy — they should keep the following two things in mind:
First, businesses should stay in their lane when it comes to giving COVID-19-related advice.
Whether on your own company blog or via publication on outside media, founders and marketers should refrain from providing healthcare advice if they are not qualified health experts. This is not only dangerous, it could have a severely negative impact on your brand. As former MIT marketing professor Mark Ritson eloquently put it in a recent column in Marketing Week, “The first lesson of the coronavirus crisis that now engulfs us is to shut the f*ck up and let the experts guide us.”
Instead, founders should only share valuable expertise as it relates directly to their company, industry or community.
Second, now is not the time for public relations stunts. It’s the time for genuine help.
As the novel coronavirus spreads across the globe, thousands of businesses are stepping up to help produce much-needed PPE and other supplies for hospitals and testing labs racked by the outbreak.
For example, startups in New Orleans like Entrescan are working with Scale Workspace to 3D print face shields for local hospital workers, and a 13-year-old Chicago boy who is part of a network of 100,000 printers on 3D Printer OS, a software for 3D printing, has created filters for masks. Los Angeles blockchain startup Vottun recently partnered with Oracle and PwC to create technology that records and verifies COVID-19 test results, while VivaAir Labs, an airline innovation lab for the travel industry based in Latin America, is holding a startup competition with a cash prize for ideas to safely revitalize travel after the outbreak subsides.
However, some businesses are coming under fire in the media for half-hearted relief efforts, or repackaging current products or offers in a humanitarian light when not merited.
For example, Tesla was recently embarrassed for announcing that it had procured 1,225 much-needed, FDA-approved ventilators for hospitals. In desperately short supply, ventilators are used to help stabilize patients whose lungs are severely affected by the virus. News reporters would soon uncover that what Tesla actually delivered to hospitals were BPAP machines, non-invasive ventilators that people with sleep apnea use, not the type required for intensive care units.
Also, many providers of work collaboration and communication software, such as teleconferencing services, are getting pushback from the media because they marketed their freemium access and free trial solutions as social good initiatives during the outbreak when shelter in place orders moved much of the world’s workforce online.
As businesses take on more responsibility for the overall betterment of society, startups should be encouraged to help solve the world’s most pressing issues, and they should be recognized when they genuinely do so. But short-sighted PR stunts or crafty marketing campaigns during times of real societal distress will have a negative impact on a company’s long-term marketing strategy, and should be avoided at all costs.
While we are living through a disease outbreak the scale of which we haven’t seen in over a century, and the true economic impact of the virus could potentially not be revealed for years, it is helpful for startup founders to reflect on past economic crises to help them guide their businesses through this one.
By being surgical with marketing budget cuts, doubling down on messaging for core products and customers, and responsibly acknowledging the current crisis in your communications while not being enveloped in it, startups will come out stronger in the end.
Source - TNW