How to Protect Your Profits

Slashing Costs Isn't the Only Way to Weather the Recession; Here Are 10 Other Tips

By Published on .

Most Popular

Yosi Heber
Yosi Heber
In dealing with the worst global recession since the Depression of the 1930s, marketers' natural instinct is to take an expenses "haircut" -- reducing head count by 10%, cutting marketing expenses 20% and postponing investment. But this normal, tactical approach likely will miss the mark and not be enough this time around.

Instead, it's time marketers also assessed their companies' performance across the various areas that can help protect profit. While largely marketing/sales-oriented, they cross into areas such as strategy, organization, cash flow and pricing. By leveraging the 10 strategic profit protectors, CMOs can reduce the effects of the severe economic downturn in ways that go beyond profit-threatening cost cutting.

1. OPTIMIZE STRATEGY, PRODUCT LINE AND COMPETITIVE ADVANTAGE
First, overcome the paralysis that is gripping many companies. Clarify a strategy based on the current conditions and focus valuable resources on core businesses. Then think about how to reposition some brands with a value-based message. Kraft Foods' DiGiorno Pizza created effective TV spots that point out a delivered pizza costs $16.13 while a DiGiorno pizza costs $6.69. And its tagline -- "DiGiorno: Fresh delivery taste without the delivery price" -- highlights quality and value.

2. IMPROVE COMPETITIVE-INTELLIGENCE TRACKING
Have eyes and ears in as many geographies as possible to monitor competitive pricing moves and cash-flow positions. Regularly review their websites, press releases and press coverage to learn about their new products, promotions and strategic moves.

3. REALIGN ORGANIZATION AND PRIORITIES
Create a central senior team to monitor key indicators and be sure marketing and sales are perfectly aligned with key priorities with each other. Make sure there is also an internal approved list of the priorities you will not be focusing on. Also identify your best-performing employees and treat them accordingly so you don't lose them.

4. INITIATE RADICAL SCENARIO PLANNING AND FLEXIBILITY
Determine whether the organization is prepared to react quickly if the landscape changes suddenly. Aside from the usual 20% down "low" scenario, map out a realistic worst-case scenario (like 50% down). Then figure out what would happen to your bottom line if your biggest customer (or distributor), which accounts for 20% of your revenue, goes bankrupt.

5. ENHANCE EXISTING CUSTOMER RELATIONSHIPS
Lose your best customers, and you could be out of business. Send them relevant e-mails that inform, incentivize and entertain. Johnson & Johnson's BabyCenter does a great job with this. When a mom signs up, she gets relevant e-mails (based on her baby's age) customized with tips, tools and offers/subtle promotions for Johnson & Johnson products. A loyalty program can also be very powerful.
ABOUT THE AUTHOR
Yosi Heber is a former CMO and senior executive with Kraft, Dannon and IAC/InteractiveCorp. and now president of the strategic-marketing firm Oxford Hill Partners, based in Oak Park, Mich.

6. STRENGTHEN SALES-FORCE EFFECTIVENESS
Reprioritize your most important and profitable customers via a heat-map approach. Explore fulfillment of some less-profitable orders through alternative channels such as the web and telesales rather than live sales reps. Leverage paid search to drive some warm leads instead of always sending a sales rep to make a cold call.

7. MAXIMIZE REVENUE AND CALL TO ACTION
Provide coupons and trial samples to give consumers an incentive to purchase at retail. And actively cross-sell related products the way Amazon points out related books, bundled at a discounted price.

8. CAPTURE NEW CUSTOMERS AND STEAL MARKET SHARE
Flaunt customer testimonials and success stories on your website. Tap into word-of-mouth and viral techniques. Procter & Gamble's Tide site enables users to send e-mails to as many as five friends and challenge them to a Tide game. Also, tough times like these may be unique moments to steal retail shelf space from competitors. As trends change, retailers often reassess and kick out loser brands.

9. LEVERAGE STRATEGIC PRICING
Remove unnecessary costs from your product or package to lower prices without hurting your margins. Cost-conscious consumers are willing to get a less-fancy package if they can pay less. Unilever's Skippy jar now has a dimple at the bottom. As a result, there is about 10% less peanut butter in the jar than before (16.3 ounces vs. 18 ounces).

10. MOBILIZE WORKING CAPITAL AND HIDDEN CASH RESERVES
Free up cash by reducing safety stock and other built-up inventories that are unnecessary. Dell has creatively used Twitter to sell businesses more than $1 million worth of excess computers. If it makes sense, consider producing some private-label products to squeeze more out of underused production assets.

In this article: