It can be reasonably straightforward to lead a company through times of prosperity. However, leading a company through times of economic downturn is a challenge that will test the innovation and resistance of even the best product managers. During an economic downturn, it is essential for product managers and product marketers alike to implement best practices to maintain their market share. In this article, we will explore five such best practices for managing products through a bear market.
1) Focus on Innovation
Innovation is often something that companies will place on the back burner during times of economic hardship. According to an article published by McKinsey & Company, though, innovation is something that companies should prioritize rather than relegate during an economic downturn. The report states, “Many businesses simply cannot operate as they have in the past. What made a company successful historically may no longer be possible during or after the crisis…A stable regulatory context may have changed, potentially creating opportunities that never existed before.”
2) Ramp Up Marketing Efforts
The temptation to cut marketing spend during an economic downturn to reduce costs is understandable. However, marketing is one of the best tools that companies have available to maintain their market share through a crisis. In the article “Marketing Your Way Through a Recession,” the author states, “It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”
3) Cut Costs
While reducing marketing spend might not be the best way for product managers to navigate a downturn, it is essential for them to cut costs wherever possible. The key, though, is determining what expenses can be cut without damaging the company’s ability to maintain its market share. In an article titled “Managing Effectively in a Downturn, Turning Challenges into Opportunities,” published by PricewaterhouseCoopers, they identify two areas of cost reduction. They mention one short-term cost reduction strategy targeting discretionary expenditure to separate the essential from the merely desirable. One medium-term cost reduction strategy comes from assessing the value derived from each expense category and includes a special emphasis on procurement and inefficient practices, and waste.
4) Prioritize the Needs of Your Current Customers
It is well known that successfully selling products to an existing customer is much less expensive in terms of marketing spend than selling products to a new customer. During economic hardship, companies need to capitalize on their existing customer base. According to a study in Vol. 6 of the International Journal of Business and Social Science, “It is not easy to get new customers when the economic clime is normal not to talk of periods of economic downturn. Ask current customers what they need from you. Enable the sales teams to be more effective as the competition might get tougher. Care for your current customers, and they will likely stick to you if the going gets tough”.
5) Carefully Manage Your Inventory
During an economic downturn, slumping sales can often lead to bloated inventories, a significant source of unnecessary expense. To avoid being saddled with excess inventory that ties up your cash flow, it is critical to manage your inventory carefully. An article titled “Survival Tips for Managing During an Economic Downturn” published by the US Small Business Administration states, “If your business traditionally stocks 250 units of each of its slowest-moving products, consider cutting that number to 100 each. Monitor the results, keeping an eye out for those products that can tolerate even leaner inventories, or that should be eliminated from your stock. This way, if sales nosedive, less of your cash is locked into unproductive assets.”
Effective Management is the Key to Surviving an Economic Downturn
Product managers and product marketers play a pivotal role in helping companies navigate times of economic hardship. Since it is impossible to know when the next crisis will strike, product managers need to plan ahead of time to manage products through an economic downturn. While the job of a product manager undoubtedly becomes much more difficult during a downturn, creating a plan that includes the five tips outlined above is a great way to ensure that you and your company can weather whatever economic storm might come next.