Slippery Slump

Financial forecasters foretell that the technology sector leads the economy out of recessions.

Which means we are in for a long one this time.

I decline to scare my fellow technophiles into believing the end is nigh. It might be … I just lack any specific evidence indicating eminent doom. North Korea and Iran are persistent wild cards but they have nothing to do with technology marketing. They are strictly consumers of high tech products like rockets and reactors.

Yet as recessions go, this one will be worse than average. Today the Federal Reserve – co-progenitor of the current recession, thank you Mister Greenspan – downgraded their economic forecast. Far from being Depression 2.0, the outlook is still glum with unemployment rates and GDP shrinkage rivaling the late 1970s. The Fed’s dower description of the economy echoes what Computer Economics predicts – that the recession will not bottom out until the end of 2009. Thankfully inflation is not an added factor, but given a couple of trillion dollars in new national debt, that will come along about the time the economy revives.

The effects of the recession are already felt in high tech.

During the summer and fall while giving speeches on recessions marketing, I told my audiences not to believe the overly optimistic forecasts by industry analyst. Those people are paid to be upbeat even when their clients are beaten down. Sure as silicon is sacred in The Valley, analyst fall forecasts are proving to be higher than Peruvian Coca farmers.

Look at any sector in IT technology and you will find no sunshine. HP reported today, and except for services they see slumping sales. Servers down. PCs down 19%. Printer and ink (for Gawd sake) down 19%. In other words, if it is a commodity or a supply, belt-tightening rules apply and sales have and will continue to degrade.

What does a marketing executive do during periods of economic carnage, aside from investing in the Jack Daniels company one bottle at a time? It largely depends on the market and segments in which you play, but there are some simple rules for recession survival.

Best buddies: IBM makes about 20% of their annual revenues off a mere 100 customers. Targeting long-term relationships on which you build near exclusivity helps. Pick your top 100 and arrange sit-down strategy meetings to learn their plans and forecasts. They don’t stop spending during recessions, but they do change their priorities. Know those priorities and apply them to your top 100 and perhaps the rest of your customer base.

Sell proper pills: Marketers stereotypically peddle either pain pills or vitamins (i.e., “we can cure your problems” or “we can make you a muscle man”). Selling pain relief has the unfortunate requirement of discussing pain, and unless your particular digital analgesic relieves your customers of recessionary afflictions, then you increase their desire not to spend by discussing pain. Switch mainly to selling vitamins. Show how you can make them stronger in bad times. Your message will be better received.

Up and away: Sell up and sell laterally into existing accounts. During down cycles, people don’t want to take on new technologies because it amplifies risk. However, selling up and selling sideways is selling into existing accounts where you are known and trusted. T’is better to sell a low cost add-on module to 100 existing customers than nothing to 100 new customers.

Socialize: Social marketing works in B2B … believe it or not. Studies show peer-level recommendations work in high tech. But you have to instigate and facilitate these conversations. The good news is that once you learn the ropes, this can be cheaper, faster and more effective than other forms of marketing. During a recession they may be imperative as many people resist thinking about purchases until someone they trust brags about their buy.

Then there are services. It may be too late in the game for you to invent meaningful sets of new services that have clout in a staggering economy. But HP’s report shows what IBM figured out a long time ago: that IT is complex to the point that services are more important than product (and increasingly so since IT products are rapidly commoditizing). HP’s services revenues (discounting the effects of their recent EDI acquisition) crept up.

The take away is this: marketing during a recession requires being closer to your customers than ever before, be it tapping your top clients, selling deeper into your base, or becoming a service oriented outfit. In down times think high context, not high volume.


Speak up! What are your thoughts?

Your email address will not be published.