When economies decline, scaling back to ensure survival makes sense.
But too often those cuts can be reactionary, often targeting customer-facing functions like marketing. Traditionally, leadership considered things like branding, community engagement, advocacy, market research, and customer listening to be fun but expensive efforts not core to operations nor contributing to the bottom line.
Research reveals this thinking to be wrong. In fact, companies that live and breathe a customer-centric strategy actually perform better during a downturn.
How do we know this? The proof is in the performance.
From 1994 to 2018, the Walker Index tracked the performance of companies that use the customer perspective as an important management lever to drive results. As markets grew, these customer-centric companies increased in value alongside the NASDAQ, S&P, and Dow Jones indices. But when markets fell, the Walker Index companies outperformed the market: maintaining their value longer, falling only about half as far as the broader market, and recovering faster from downturns like the 2000 dot com bubble and the 2008 stock market crash.
More recently, the Qualtrics’ XM Institute took a similar approach, looking at stock performance of the companies with the best and worst customer experience ratings. Here again, customer-centric leaders outperformed laggards, particularly during the ‘Covid recession’ in early 2020.
There are few reasons why this happens. Investing in a customer-focused strategy and culture lets these companies:
Keep an open line to customer needs
Maintaining customer-facing people and programs keeps communication flow open during a downturn. But this connection is not all about continuing to market your products and services. Much more valuable in a downturn is the ongoing inflow of customer insight. During critical times, this pipeline lets you stay informed of what customers care most about, how their business is being impacted by adversity, and what they need from you in order to survive. You might think you know, but you may be surprised.
Develop less risky, more stable business models
A steady flow of customer insight ensures you stay in touch with what creates the most value for your customers, what drives purchase behavior, and what fuels loyalty. This kind of evidence helps make a business case for which of your core products and services customers need to maintain their own value during the downturn and beyond. When
marketing can bring this insight to leadership, it can give your company a clear idea of what to focus on to pull ahead of competitors, better weather the storm, and emerge as healthy as possible.
Cultivate better relationships
Trust is key anytime, but in a tough financial climate it’s crucial. Investing in relationships through hard times shows customers that you care about their survival, and that you’ll continue to deliver what they need to emerge stronger. Prioritizing their future drives loyalty, helps you maintain your customer base, and may even let you recover faster. What’s more, when you’re tuned in to your customers’ business, you’re already there when budgets start to reappear. You know what they need for the rebuild, and you know the right time to switch from safety netting into business generation, helping them grow and capturing upside quickly.
Continue to show presence and value
Companies that cut their social media team and advertising budgets during a downturn cut their voice. What if your competitors don’t? They keep building awareness and remain top of mind, and you cease to exist for all intents and purposes. Customers may think you’ve gone under, so you might as well have. Sure, you’ve maintained your manufacturing team and continue to turn out products, but will anyone know about them? When you maintain channels of communication, you preserve customer confidence that you’ll be there for them during and after the storm.
Even though our first instinct in tough times is to protect the future of our own business, it’s clear that working to protect the future of our customers’ business takes us further.
With the advancement of marketing data measurement and reporting capabilities, there should be no more doubt that marketing is a revenue generating function. And as a primary customer-facing unit alongside sales and support, marketing is a critical link in the customer-insight chain.
Unfortunately, marketing still needs to battle gut-level thinking by demonstrating value, communicating results, and sharing customer insight with leadership to ensure scaleback decisions are fact-based and position companies to come back stronger.
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