We are experiencing unprecedented events as the COVID-19 virus devastates the economy and healthcare systems. It is a human tragedy, the likes of which we haven’t seen in nearly a century.
Over the span of several weeks, entire industries have shuttered. Unemployment skyrocketed with a record 10 million Americans filing for benefits over two weeks. Nearly everyone who can is working remotely , with some adapting to the lifestyle for the first time.
As a leader, you not only have the health of your family to worry about, but you also have the health of your business and your employees top of mind. As we watch the dire headlines, it is imperative not to panic. While it’s tempting to make drastic cost cuts such as layoffs to buoy the bottom line, these offer a temporary relief that may or may not ensure your company survives.
Every situation is unique, and some of the following options will not apply. But if possible, there are other steps you can consider before making those difficult decisions. If you refocus your strategy, invest in marketing to your loyal customers, and take care of yourself and your team, you may find ways to navigate this turbulent time.
Marketing is still vitally important
As leaders search for ways to tighten budgets, be wary of cutting too much from marketing. With the Consumer Confidence Index dropping , it’s more important than ever to be a trusted brand that is attuned to your customers’ needs.
Understanding your customers will involve more market research as your market segmentation strategy changes. Before the COVID-19 crisis, you may have segmented your customers based on lifestyle or demographics; now, you should reconsider through the lens of psychology.
How are your customers reacting emotionally to the changes happening around them? How does it impact their behavior as a consumer?
Harvard Business Review broke down common consumer behavior during economic downturns into these four segments:
- Slam on the brakes: This segment is extremely anxious about the future and tries not to spend any money.
- Pained, but patient: The largest segment, these consumers remain optimistic about the long-term future, but wary of the near future. They are careful with their money. Often, this segment includes households untouched by unemployment. As news gets worse, they may move into the slam-on-the-brakes segment.
- Comfortably well-off: Primarily people in the 5% income bracket or those comfortably retired, this group may be slightly more selective in how they spend money, but overall they still consume quite a bit. They feel secure about their ability to ride this out.
- Live for today: Typically urban and younger, this segment does not save much and will continue consuming as they normally would. They may hold off on any major purchases, but for the most part they remain unconcerned and their behavior won’t change unless they become unemployed.
HBR also breaks down the different types of products and services that people consume by need:
- Essentials: purchases necessary for survival
- Treats: indulgences whose immediate purchase is considered justifiable
- Postponables: needed/desire items that can be reasonably put off
- Expendables: purchases perceived as unnecessary or unjustifiable
In these strange times, anything involving human contact is considered expendable. How can you pivot to offer what consumers see as essentials or treats?
This is where market research is critical. Invest in gathering data on your customers’ behavioral trends. Analytics such as which product has decreased the most in sales and who is most active on which channels are valuable insights. Findings from polls and surveys, which are low-cost options, will also help you better understand what your customers need.
Stay loyal to your brand
Everyone will most likely have to make cuts, but try not to sacrifice your company’s values or value proposition.
For example, if you’re a luxury brand and you slash prices dramatically, you may see an influx of purchases at first. But eventually, you’ll realize you alienated your core customer group that was loyal to you for what you symbolized before this crisis. That can be crippling long-term.
Triage your current products and services. With your customers’ psychological market segments in mind, ask yourself: which of these products will flourish, which won’t survive, and which will suffer but eventually stabilize?
Salesforce is a success story entirely built on staying loyal to its brand and its customers.
In 2005, Salesforce was an innovative leader in the CRM space , but few knew it was debilitated by an 8% monthly churn rate . For reference, the average churn rate for SaaS companies is about 4.8% monthly . If it didn’t stop the leak, Salesforce would sink.
Realizing that retaining customers had to become as important as winning new ones, Salesforce adopted customer success as one of its core values: “our customers’ success is our success.”
Despite the Great Recession, Salesforce grew its revenue from $497 million in fiscal 2007 to nearly $1.1 billion in fiscal 2009 .
How? Salesforce did not stray from its core values despite the frightening economic climate. The focus on an excellent customer experience, regardless of the size of the deal, paid off big.
They did their market research, paid close attention to their customers, and provided what customers needed. Prospects saw the great experience Salesforce customers received and wanted in on it.
There’s only one Salesforce, but the lesson here is: if you remain loyal to your brand and your customers, you will most likely see some level of success, too.
Refocus and pivot
As scary as it is, you’ll need to abandon your previous criteria for success. Those goals just aren’t feasible anymore, and the sooner your team recognizes that, the better. You made them in an environment that no longer exists, and this economic downturn may last a long time.
Be honest with yourself in setting new, attainable goals in the current climate. Based on those goals, you’ll know what needs to be rearranged in regards to strategy and budget.
Make sure you are keeping a pulse on the current realities. With everyone social distancing inside, it doesn’t make any sense to fund certain types of marketing. Event, field, and experiential marketing are not feasible in this environment.
That said, that money and effort can be reallocated to the types of media people will be consuming at home, which are primarily social media, broadcast, and content marketing.
If possible, maintain or increase your advertising budget on these types of media. When looking at over a century of data on how companies that advertise during economic downturns perform compared to how companies that do not advertise, the results are clear: advertising pays off.
Even while you refocus and pivot, you should adopt a future-back strategy. What do you want the company to look like at the end of this economic downturn? Three years from this economic downturn? As best you can, try to make decisions with that vision in mind.
What is happening right now is a human tragedy.
We cannot forget the human element of this – the trauma, the grief. It’s so important to be mindful and to follow these three pillars of strength.
Take care of your customers. Right now many people value affordability, connection, and safety. As a brand, as a human, ask yourself how you can help. Do away with penalty and adoption charges. Offer new subscription options or unbundle your offerings so people can pick and choose. Send thoughtful messaging in your email newsletters and on your social media accounts.
A great example of putting your customers first during difficult times is Hyundai’s Assurance program during the 2008 recession. It provided customers the opportunity to return a purchased or leased car if they lost their income within a year of sale.
Take care of your team. Let them know you think of them all the time. Be as transparent with them as possible in regards to the business’ health – they deserve that. And if you have to make the tough, heart-wrenching decision to let part of your team go, it’s crucial your remaining team members feel you’re full of love and care for their well-being.
Take care of yourself. As an entrepreneur and CEO, this is Godard’s biggest piece of advice to other leaders because it is often easy to overlook. Be in tune with how you’re doing mentally, physically, and spiritually. It’s important to be more present and conscious than ever.
We can do this
The COVID-19 crisis will change the world as we know it. How exactly remains to be seen, but we are all in this together, as professionals and as a community.
There’s no doubt that difficult times are ahead of us. While this article is optimistic, this downturn is unlike any other we’ve experienced in recent history and can only be compared to the past so much.