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30 Jun

Don’t Let The Market Kill Your Enthusiasm

Posted in Markets on 30.06.13

mkyeCorporate America has enjoyed unprecedented growth over the past decade. When the stock market soared past 11,000 on May 3 nearly everyone displayed confidence in the future. But the economic landscape still isn’t as giddy as it was before the reality of troubled foreign markets hit many minds. Asian markets last year declined by as much as 80 percent. Latin America, the fourth largest U.S. trading partner, slowed from a record high growth rate of 5 percent in 1997 to an estimated 1.5 percent in 1998. Russia and Eastern Europe teeter near economic collapse.

Even if the gloom and doom surrounding the health of the global economy has waned a little, the shrinking of some foreign markets has changed many companies’ market outlook. Still, marketing strategists can set a successful course for their companies by carefully analyzing fundamental marketing issues.

Look beyond your markets. It’s not enough to know your own markets. You must look at the markets your customers serve. Like you, your customers are being forced to shift their business models. What may have been true about your customers’ corporate strategies and how your solution fit yesterday, may no longer apply. Assess the impact of possible changes and make adjustments quickly.

What are the likely retrenchment tactics of the customers in your target markets? How should your marketing plan change as a result? The key is to anticipate the fundamental changes your customers will need to make in order to be successful in a shrinking global market. Retrenchment tactics can include increasing U.S.-based manufacturing, putting price pressure on suppliers, slowing the pace of upgrades, and increasing investment in cost-saving technologies. These changes will differ within each market segment and within each geographic region.

At the very least, follow the financial predictions about your customers’ markets, not just your own. Then, within each market, identify who will fare best in a smaller economy. From this information, develop plans to focus on specific major accounts or on subsegments within your key market segments.

Assess your competitive position. Now, more than ever, companies must own a market segment. In a down market, customers’ buying psychology shifts. They go with a known entity. They play it safe. If you are not first or second in a given market segment, you have some serious thinking to do. And if you do enjoy a top spot, you must leverage that position aggressively.

Assuming you’re in a relatively poor position in one of your defined market segments, You have two options: exit the segment, or re-define it to change your position. Sometimes an exit is the right choice. If you have not succeeded in a certain arena, ask yourself whether you should continue to invest in it.

The other option, redefining your segment, can be one of the most effective approaches to securing a lead. Redefinition is largely a matter of positioning. One of the best historical examples of a tech company’s use of that option to improve its market position is Sybase.

rdbmsIn the late ’80s, Oracle was the dominant relational database vendor, and the market was littered with competitors. Sybase lacked the size and sheer market strength of Oracle. But in a stunning marketing maneuver, Sybase redefined its segment. The company turned its RDBMS product into a transactional processing system, thus creating a new segment. That strategy proved incredibly successful. It resonated with Sybase’s largest target audience, the financial community, whose biggest concern was managing high transaction volumes.

A more contemporary example is Sun Microsystems. Positioned as a vendor of workstations for desktop computing, Sun found itself losing the desktop war against Intel and Microsoft. Rather than continue to fight a losing battle, Sun redefined itself as a network-based computing company, reviving a position it had used almost since its inception.

Sun can now declare Microsoft the winner in desktop computing and still claim ownership of a market segment. The company, however, hasn’t stopped there. To further strengthen its “new” position, Sun has attempted to reposition its traditional competition–IBM, Digital (now Compaq), and Hewlett-Packard–as offering host-based computing solutions. Such marketing savvy at a crucial juncture in the company’s history helped propel Sun back into the spotlight with strong growth prospects.

Of course, if you own a dominant position in your defined segment, you can’t rest. It is imperative that prospects understand the importance of doing business with you. In a down market, they will need to sell and justify your solution internally to people who may not know who you are. You need to provide your prospects/customers with ammunition to make their buying committees feel comfortable committing to your solution.

Revisit the role of each geography. So far we’ve looked at your customer’s markets and your position within each market segment. Now we need to look at specific geographic regions and the impact they have on your global marketing strategy. You should ask yourself two questions: (1) What are the geographies that are most important to you vis-a-vis your competition? (2) What is your competition’s strategy within each of these markets?

To help you assess geographies and the necessary decisions based on your discoveries, consider a few examples. Assume the first geography under review is China, which has positive growth. If your key competitors are increasing their investment, you must match their investment (percentage) growth or lose out on immediate potential returns. That move is essentially a defensive maneuver.

If your key competitors are now decreasing their investment in China, you have an opportunity to significantly ramp up your investment, relative to your other geographies. Thus, you would take advantage of the opening your competitors have created, making an offensive maneuver.

Now, consider a second geography, Indonesia, which has negative growth. If your key competitors are investing more than they have historically (or more than you think prudent), you should minimize your investment. In some cases, you should exit the market for a period of time. In this situation, you may find the cost of re-entry lower than the costs of remaining in a market.

If your key competitors are investing less than you expected they might to defend their current position in Indonesia, you may want to invest more than you would otherwise. Again, you’re taking advantage of the opening they’re offering you. This is an offensive maneuver with a longer payback period.

Discipline is the key to success. A down-turn in the global economy doesn’t have to spell disaster for most companies. But it does mean that companies must become more disciplined. Marketers can contribute to their company’s success by adopting the type of analytical evaluation process recommended here. Knowledge and the ability to act on information will go a long way to securing success despite market turmoil.

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