Crises force companies to take decisions on multiple fronts and in parallel

How to deal with the economic crisis

20 August 2020

The Covid pandemic is forcing companies to adjust and ideate ways to not only survive but to prepare organizations to innovate under a new and uncertain business context. Although not the same, there are some lessons learned that we could extract from actions taken by SMEs that have faced economic crises within struggling countries. 

What have companies experienced under economic crisis? Companies facing this sort of crisis have experienced, among others:

  • Decrease of production volume and portfolio of products
  • A decrease in sales and demand
  • A decrease in the availability of raw materials and other inputs
  • A decrease in the distribution capacity
  • Migration of qualified human resources
  • From a consumer perspective, a loss of meaning of the brand.
  • Consumers have less cash to spend and change their shopping behavior.
  • The proliferation of low-quality/no-brand competitors that steal the already diminished market.

What kind of actions have companies taken to face economic crisis? Companies have implemented actions around cash preservation and business model adjustment to new market conditions. Some of them:

  1. Create strategic alliances to increase capacity/efficiency, e.g. distributing a third-party product to reduce empty spaces; as well as to protect/support independent distributors, when weaker than the company: e.g. trade support for critical activities (such as truck maintenance) in exchange for broader information on their customers
  2. Revise customer profiles, to reconsider the relevancy of customers’ needs or expectations, pains, and gains.
  3. Complement market offerings to improve value propositions, profitability, and/or product or service attractiveness leveraging on the same cost to serve structure.
  4. Define new revenue streams, simplify packaging, and create smaller presentations to smooth customer expenditure in time.
  5. Design specific Customer Experience to attract more customers, incorporating different points of contact with the customer, as well as more effective and efficient marketing and customer relationship actions and channels.
  6. Rationalize trade marketing activities without neglecting the brand, leveraging on social media to transition from face-to-face and physical experiences towards more digital ones.
  7. Review commercial conditions, eliminating or reducing price discounts and restricting payment terms.
  8. Prioritize shipments, looking at specific criteria such as relationship and profitability.
  9. Optimize distribution network, rationalizing the number of stores and distribution centers and analyzing “cost of serve” to improve mechanisms to reach customers, combine routes and close non-profitable accounts.
  10. Reduce organization complexity, by for example: cutting all non-essential activities, going paperless, using creative compensation mechanisms.
  11. Use Social Responsibility as a “must- have” marketing tool, identifying ways to contribute to the community and the safety of the population.
  12. Optimize internal communications and trust, by inviting employees to collaborate and become co-participants of required changes.
  13. Have data-intensive governance and more Self-Service Analytics, allowing the periodic monitoring of your business variables and brand perception.
  14. Have clarity of the relationship map of your business, to understand how all stakeholders are managing the crisis, protecting the weaker or smaller ones that depend on you to prevent negative impact on them and therefore on your own business.

“The secret of crisis management is not good vs. bad; it’s preventing the bad from getting worse” – Andy Gilman

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