I LOVE RECESSIONS

The Recession-Proof
Business Strategy
There are actions a company can take to reduce
the impact of recession and even prosper!
Source: Victory Cheng (http://www.victorcheng.com)
1
Ron McFarland, Tokyo, Japan
ronmcfarl@gmail.com

2
What is the truth about the recession and what can be done?
In the height of a recession, a company can channel all
its nervous energy about its future into proven actions
which will not only protect the business but help it grow.
Our action plan
in this environment
This presentation is not empty motivation with no facts or actionable
advice for your business in a recession.
It is high of recession facts and gives very specific actions a company
can take to avoid the adverse influence of a recession.
ronmcfarl@gmail.com

3
History of successful companies in a recession
Based on research of companies that has done well during
recessions in the past, they were in this situation. This is data of
companies that started during the last 12 recessions going back
136 years in US history.
Here is what we found from these companies.
1. They started in a recession and prospered.
2. They were small and weak in a hostile business
environment and grew from there anyway.
3. Their behavior can be apply to today’s situation.
4. They were in an environment that required the CEO to
firmly make decisions and act on them quickly.
Here is our plan to take advantage of this recession.
ronmcfarl@gmail.com

4
The Recession-Proof Road Map
In these recessions, four characteristics were
present in all the successful companies studied:
1. Established a strong, positive mind-set
2. Solved problems that get worse in a recession
3. Minimized the problems by offering unique
solutions.
4. Marketed more aggressively, not less.
ronmcfarl@gmail.com

5
Characteristic #1: Established a strong, positive mind-set
What do
people need in
these times of
uncertainty?
The owners of these start-up companies in recessions had passion,
tenacity and aggressiveness that defied all logic.
Others had a self-defeating attitude.
They believed in four things:
1. There was money in the economy, and they believed they could find it. They knew it
would be more difficult to find, would be in a different place than where past money
would be. Also, they knew people’s priorities would be different than in better times.
2. They based their business decisions on facts, not dramatic news headlines.
3. They found needs and opportunities that a recessions create. One opportunity is
created by the defeated attitudes of ones competitors.
4. They know they had to adjust to the environment or go out of business. They did not
ignore the faces in front of them. They continually got feedback, recognized
opportunities and acted quickly.
ronmcfarl@gmail.com

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Characteristic #2: Solved problems
that get worse in a recession
These needs,
wants and desires
increase in an
uncertain
economy!!
Billion dollar companies are made more in recessions,
depressions or economic panic than prosperous times.
They found what was needed in a recession.
ronmcfarl@gmail.com

7
Characteristic #2: Solved problems
that get worse in a recession
These companies did not panic but redirected their attention.
They looked for what people were complaining about and
would pay to solve that complaint.
ronmcfarl@gmail.com

8
Characteristic #3: They minimized
the problems by offering unique solutions
We have never worked
together before, but I think
we can help each other.
They talked to and approached people they normally don’t
associate with.
They started doing things that were unheard of at the time.
They expanded into underserved regions that no one else was
interested in.
They repackaged products that were very unusual at the time.
ronmcfarl@gmail.com

9
Characteristic #3: They minimized
the problems by offering unique solutions
Target
Market
Different
Product
Different
Pricing
Different
Region
Different
Promotion
They looked everywhere to find something that was needed in
that economic environment. After much study, the came up with
a unique solution.
ronmcfarl@gmail.com

10
Characteristic #4: They marketed more aggressively, not less
Once they plotted out their specific course, they dedicated
themselves to it, convinced others of the concept and aggressively
promoted it.
When the competition was hesitating, slowing down and being
indecisive, that is the time they expanded promotional activities.
In this short time of competitor doubt, the successful companies
moved very quickly, as they knew this opportunity would not last
long.
ronmcfarl@gmail.com

11
Recession Success Story #1: Fortune Magazine
It started 90 days after the Great Depression market crash in 1929.
All thought it would fail.
It became a huge success because people wanted to know where
their money was going and how they could control it.
Fortune Magazine offered the kind of information the people most
needed at the time.
ronmcfarl@gmail.com

12
Recession Success Story #2: United Parcel Service (UPS)
When recessions come, most companies put all their
attention on costs, sales and profits. The needs of the
customer gets less attention.
UPS noticed the need for reliable deliveries when the
competitors had their attention elsewhere.
All the company’s effort, image and focus was directed
toward reliable deliveries.
They thought if all employees dressed the
same, behaved in the same polite manner, and
showed up on time every single time, the
customers would believe them having reliable
service.
They were open for business 24 hours a day, 7
days a week and 365 days a year. No other
company would consider that in 1907.
They aggressively promoted reliability and
build credibility through testimonials from
satisfied users.
ronmcfarl@gmail.com

13
Recession Success Story #3: The Walt Disney Company
In 1928, the middle of the Great Depression, Walt
Disney introduced amazing cartoon characters and
cutting-edge usage of audio sound.
When there is much uncertainty in the economy, the
demand to escape to the movies usually increases.
When long vacations were not possible, like in a deep
recession, nearby theatres were the next best thing.
Through their aggressive efforts, even when
industry-wide box office sales were down, Disney’s
business boomed.
ronmcfarl@gmail.com

14
Redirecting Customer Demand
The best way to redirect your marketing when demand changes is
to apply what is called “direct response marketing”.
During most business start-ups, someone sells something to
another person face-to-face.
Marketing is just taking face-to-face salesmanship and multiplying
it using a wide range of media.
Image advertising is designed to build awareness only.
Unfortunately, image advertising does not make direct sales and a
great deal of money can be wasted on advertising that produce no
results.
ronmcfarl@gmail.com

15
Redirecting Customer Demand
1. Direct response marketing “sells” and asks prospects to take
action.
2. Direct marketing asks the customer to do something.
3. Direct marketing can be tracked and the marketing activity can
be analyzed to whether it is effective or not.
4. This type of markets is accountable for getting a customer
response. If there is no customer reaction, it must be stopped,
changed or modified.
ronmcfarl@gmail.com

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Getting the attention of the target customer
With all the communication methods available at very little cost, people are
continually overwhelmed with too much noise around them.
Therefore, companies must develop a 1-unique, 2-compelling and 3-credible
promise.
Unique
• A unique promise that is very different
and exceptional.
Compelling
• A compelling promise that connect
with user needs and wants
Credible
• A credible promise that can be
confirmed by others and verified with
specific data
ronmcfarl@gmail.com

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Components for making a promise unique
Who are you making the promise to? – You can change your
target user to make your promise unique (small business-large
business, restaurants-stores, adults-children). It is important to
make this target as specific as possible.
What are you promising? – You can group products differently.
You can offer added services now not available.
Where will you deliver the promise? – You can change your place
of business or offer delivery/pick up if it does not exist now.
When will you deliver the promise? – You can change business
working hours. You can increase the speed of your service or
more fine tune the speed of your service.
How will you deliver the promise? – You can change how you
deliver by adding product training to the users, or add a show
with the promise (Benihana cooking in front of customer).
ronmcfarl@gmail.com

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Making the promise compelling
Great, that is just what I’ve
been looking for but didn’t
know it myself.
What do people want and what do they really need now? Your
promise must provide a solution to what the customer needs and
what he really wants solved.
It must be a clear and compelling promise in the mind of the target
user.
ronmcfarl@gmail.com

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Making the promise credible
Developing
Testimonial
Letters
1. Put current customer photographs on a wall.
2. Put current customer photographs in an album.
3. Prepare customer testimonial letters.
If you have a highly successful customer
that trusts you, ask him if he would be
willing to be a testimonial for you. Then,
get specific information to make it credible.
You need to provide easy-to-believe proof that you
can deliver what you say.
Using both written and verbal testimonials from
people using your product can help greatly.
Using specific details, data and examples can also
increase credibility.
The use of written guarantees can also build
credibility.
ronmcfarl@gmail.com

20
Marketing as an accountable
investment, not expense
Once a unique, compelling and credible promise is decided, it can
then be promoted. The promised must be decided first.
Too many companies either spend too much money or not enough
money on promotions because they do not know how to evaluated
it.
Every promotion investment made should be measureable in terms
of return on investment. You should know in specific details what
you get for the money spent.
The promotions that were successful in the past may fail today, as
the demands and priorities in the market may have changed. New
promotions may be required. If a change is required, its success
must be tested.
ronmcfarl@gmail.com

21
Marketing as an accountable
investment, not expense
Added profitPromotion expense Results
Measurable promotions allow a company to start on a very small
budget, yet scale up quickly when it finds the approach that works
best.
ronmcfarl@gmail.com

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What is a measurable promotion?
Please give me extension 123. I’m
asking about your free offer.
A measurable promotion is simply any form of marketing that asks the
prospect to take an action that is measurable by the company asking.
There is some kind of tracking system in place in advance of the promotion,
for example using a traceable telephone extension number, distributing
coupons to be returned, asking the customer to use a special phrase when
inquiring or visiting a specific website and asking for a specific free item.
Once the promotion is completed, response scores can be compiled.
If the promotional cost is ¥100,000, and ¥400,000 was made because of the
promotion, keep doing it.
If only ¥50,000 was made, stop doing it or modify the promotion. Keep
modifying it until the best promotion is found for the current economic and
competitive environment.
ronmcfarl@gmail.com

23
What to promote at what time
A common mistake in promotions is selling the wrong thing. They ask for
something too early.
In the selling process, there are many steps. Each steps is in sequence and
the first step should be completed before moving to the next step.
Here are the steps sales people use:
1. The salesman finds a new prospect.
2. The salesman makes a good first impression and the prospect begins to
trust him.
3. The salesman asks the customer what he is interested in.
4. The salesman makes a recommends that matches his interests.
5. The salesmen presents his suggestion.
6. The salesman demonstrates his suggestion.
7. The salesman negotiates the price and terms of payment.
8. The salesman makes the sales.
9. The salesman helps with the delivery of the product.
10. The salesman follows up to see if the customer is happy with the
product.
11. After learning all is going well, the salesman asks for referral.
For many products, the promotion should not be just asking for the sale
and ignoring the earlier steps.
ronmcfarl@gmail.com

24
What to promote at what time
Most promotions should only be to ask the customer to telephone
the company for further details, visit the store or to make an
appointment with a key person.
I’m calling to ask about your
offer to explain how a
manufacturing company can
greatly reduce its cost
producing in Vietnam.
A company doing a promotion knows what it is offering but does not
know the situation of the user.
That must be determined before the suitable product or service is
offered. Therefore, the promotion should be to sell the prospect on
asking for more information only.
ronmcfarl@gmail.com

25
The head promoter of the business
As CEO, I am responsible for
moving the company forward.
I am responsible for finding new
market segments & new
distribution channels.
As soon as the market and
products are decided, I’ll get my
sales and production people to
work on the operation.
There are three things that insure a company’s stability.
1-There is one person that is totally responsible for generating new business.
2-He finds new places to promote. He finds new market segments to target. He
creates new distribution channels to target.
3-Once the new approach is determined, he gets his team to serve that new
customer target, leaving him time to explore the next business opportunity.
ronmcfarl@gmail.com

26
Hidden, low-cost profit potential
Also, you promote and make a sale of
an extra US$100 hammer to the same
customer.
- US$50 cost for this hammer
- US$2 advertising
- US$0 salaries, rent, utilities, etc.
Net profit US$48
For example, you promote and make
an initial sales of a hammer for
US$100.
- US$50 cost for hammer
- US$20 advertising
- US$20 salaries, rent, utilities, etc.
Net profit US$10
There is a hidden profit center in your business that should be explored before
any expensive external promotion. It is approaching your existing customers but
presenting different products.
If done successfully, a company’s margins could improve greatly, as there is no
or little increase in advertising, salaries, rent, utilities, etc. as those charges are
mostly covered by the initial sale.
That is an increase of 4.8 times. In many industries, companies track items/per
invoice, or amount charged/invoice. This gives the company clues if the sales
people are offering additional services or products.
Explore selling to active customers first. Customers in your files that you have
done business before second and completely new customers third.
Ron McFarland, Tokyo, Japan ronmcfarl@gmail.com

27
Four way to sell to existing customer
#4-The
Continuity sell
#1-The
Up sell
#2-The
Cross sell
#3-The
Follow-up sell
ronmcfarl@gmail.com

28
Sell to existing customer – The Up sell
#1-The
Up sell
The extra cost of the “Up sell” is almost nothing. All it takes is a
few seconds to ask. Sales people should be trained to do this.
We have in stock enough to
complete your order, as well as 50
extra. Would you like to take the
extra items too and save you an
extra trip?
At the point of the sale, ask the customer if he is interested
buying more of the same thing to save him the trouble of
future replacement purchases.
ronmcfarl@gmail.com

29
Sell to existing customer – The Cross sell
#2-The
Cross sell
Again, if you do not tell your sales people to ask each customer ,
train them to do it and monitor their performance, they probably
will not do it most of the time.
As you are buying our air
conditioning equipment, we could
provide extended warranty or a
maintenance program as well.
Then, you won’t have to worry
about sudden repair costs.
Again at the point of the sale, ask the customer if he is
interested buying something that complements his
purchase nicely.
The “Up sell” only works in some businesses, but the
“Cross sell” works in almost any business.
ronmcfarl@gmail.com

30
Sell to existing customer – The Follow-up sell
#3-The
Follow-up sell
The “Follow-up sell” is used after the customer has
used the product/service for some period of time and
is happy with it.
If your products and services are really good, the new
customer will learn this after he makes the initial
purchase and starts using it.
Therefore, at this specific time when he knows the
product value, the sales person has an opportunity to
offer something else with little resistance.
Shortly after the sales,
visit the customer again.
Let him know you care
about him getting exactly
what he wants.
After confirming he is
happy, suggest a second
item he might be
interested in.
ronmcfarl@gmail.com

31
Sell to existing customer – The Continuity sell
#4-The
Continuity sell
Instead of ordering each time you need it, we could
look at your yearly demand by item, prepare a 3-
month blanket order and place the order every three
months. In this way, we can purchased materials at
better rate, and we can pass that saving on to you.
The continuity sale is simply to provide some offering on an ongoing
basis via a monthly agreement.
The customer can continue to get the offering until he decides to
cancel.
The advantage of continuity sales is, with continuous delivery of
product to your customer, a company gains the enormous financial
advantage of automatic, recurring, continuous billing to the customer.
The continuous billing can be automated and costs reduced greatly.
The best way to study “Continuity sell” methods is to look at customer sales history.
Then, explore what purchases could be planned over an extended period of time.
If you build up a set of customers that prefer doing business with you, habit, loyalty and
laziness can make the “Continuity sell” very effective.
ronmcfarl@gmail.com

32
Business Reinvention
If a recession has had minimal financial impact on your business, leaving things
as they are or making minor improvements might be enough.
We still have a lot of reserve cash.
Therefore, losing money for 3-4
years is not that great a problem.
ronmcfarl@gmail.com

33
We will be out of business in two
years if we do not do something
differently!
If your business is on track to pretty much fail, what is the worst thing that can
happen if you try something different? Worst-case scenario: You still fail.
Best-case scenario: You turn the whole thing around, survive, and if you move
fast enough, thrive.
ronmcfarl@gmail.com

34
If you are determined to try something different, this is where the reinvention
process starts. Follow these steps.
#1
Follow where
the money is.
You must first determine what people
want in this recession. They still
need and can pay for some things, so
what are they?
In some cases, you may be forced to
find an entirely different set of
customers who are interested in what
you have to offer.
ronmcfarl@gmail.com

35
#2
Look for a new
combination of
what you have
Look at your business. Could
anything be modified or adjusted to
bring it in align with the recession?
It could be a slightly different
production process, a slightly different
customer, a slightly different raw
material, a slightly different design, etc.
ronmcfarl@gmail.com

36
#3
Uniqueness
What makes your company special right now.?
It might have been hidden in your business and
not used when times were good. Now, it could
be very valuable.
It could be in your customer list…
your prototype products…
your distribution channel…
Or the people you know and trust.
Could minor changes in affiliating with a supplier,
a customer or a completely different company
make you unique?
ronmcfarl@gmail.com

37
Internally created
in the company
supplier-driven
reinvention process
- New production technology
- New product development
- New sales promotion
Externally created
outside the company
customer-driven
reinvention process
- New customer needs
- Change in local market
- New government warnings
In a recession, a supplier-driven and focused process to reinvention, in most
cases, has a very low chance of long-term success.
A customer-driven and focused reinvention process makes more sense, but you
must be very close to the market to know what that reinvention is. You must
regularly evaluate demand.
ronmcfarl@gmail.com

38
The challenge with a demand-driven process is the fact that it is a process. You start
with what you know and come up with your best concept for reinvention. Then, you
still need to find some way to cheaply validate it with real customers before investing
too much.
Current market
knowledge
Add new
market data
Edit useless &
unrelated market
Test data
with customers
Up-date
knowledge
Ron McFarland, Tokyo, Japan ronmcfarl@gmail.com

39
It is impossible to get it right on the first try. Therefore, you should plan for
future modifications.
Your customers will determine the success with their purchases.
The sales result is your most reliable success factor. No other opinions,
suggestions or comments matters, including yours.
ronmcfarl@gmail.com

40
Quite often CEO’s/owners are too close to the problem, think they know the
problem and ignore the new signals in the market. That is where an experienced
consulting can be very helpful.
.
A recommended consultant
that has had experience in
solving the concerns you
have, could save you a great
deal of money.
Doing everything by yourself
on a trial and error basis
could be costly and time
consuming.
ronmcfarl@gmail.com

41
Thank you
The Recession-Proof Business Strategy
ronmcfarl@gmail.com

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