When economies decline, scaling back to ensure survival makes sense. But too often those cuts can be reactionary, targeting customer-facing functions—such as Marketing.
Traditionally, leadership has considered branding, community engagement, advocacy, market research, and customer listening to be fun-but-expensive efforts that aren't essential to operations nor contributive to the bottom line.
Research reveals that thinking to be wrong. In fact, companies that live and breathe a customer-centric strategy actually perform better during a downturn.
How do we know? The proof is in the performance.
From 1994 to 2018, the Walker Index tracked the performance of companies that use the customer perspective as an important management lever to drive results. As markets grew, those customer-centric companies increased in value alongside the NASDAQ, S&P, and Dow Jones indices. But when markets fell, the Walker Index companies outperformed the market—maintaining their value longer, falling only about half as far as the broader market, and recovering faster from downturns, including the 2000 dot-com bubble and the 2008 stock market crash.
More recently, the Qualtrics' XM Institute did a similar study, looking at stock performance of the companies with the best and worst customer experience ratings. Here, again, customer-centric leaders outperformed laggards, particularly during the COVID recession in early 2020.
That's because investing in a customer-focused strategy and culture allows companies to do the following four things.
1. Keep an open line to customer needs
Maintaining customer-facing people and programs keeps communication flow open during a downturn. But that connection is not all about continuing to market your products and services. Much more valuable in a downturn is the ongoing inflow of customer insight.
During critical times, such a pipeline lets you stay informed of what customers care most about, how adversity is affecting their business, and what they need from you to survive. You might think you know, but you could be surprised.
2. Develop less risky, more stable business models
A steady flow of customer insight ensures you stay in touch with what creates the most value for your customers, what drives purchase behavior, and what fuels loyalty. That kind of evidence helps make a business case for which of your core products and services customers need if they are to maintain their own value during the downturn and beyond.
When Marketing can bring that insight to leadership, it can give your company a clear idea of what to focus on to pull ahead of competitors, better weather the storm, and emerge as healthy as possible.
3. Cultivate better relationships
Trust is important even in the best of times, but it's crucial in a tough financial climate.
Investing in relationships through hard times shows customers that you care about their survival, and that you'll continue to deliver what they need to emerge stronger. Prioritizing their future drives loyalty, helps you maintain your customer base, and may even let you recover faster.
What's more, when you're tuned in to your customers' business, you're already there when budgets start to reappear. You know what they need for the rebuild, and you know the right time to switch from safety-netting to business generation, helping them grow and capturing upside quickly.
4. Continue to show presence and value
Companies that cut their social media team and advertising budgets during a downturn also cut their voice. What if your competitors don't? They keep building awareness and remain top of mind, and for all intents and purposes, you cease to exist. Customers may think you've gone under, so you might as well have. Sure, you've maintained your manufacturing team, and you continue to turn out products, but does anyone know about them?
When you maintain channels of communication, you preserve customer confidence that you'll be there for them during and after the storm.
* * *
Even though our first instinct in tough times is to protect the future of our own business, it's clear that working to protect the future of our customers' business takes us further.
The advancement of marketing data measurement and reporting capabilities means there should be no more doubt: Marketing is a revenue-generating function. And as a primary customer-facing unit alongside Sales and Support, Marketing is a critical link in the customer-insight chain.
Unfortunately, marketing still needs to battle gut-level traditional thinking by demonstrating value, communicating results, and sharing customer insight with leadership to ensure scaleback decisions are both fact-based and intended to position companies to come back stronger.
More Resources on Customer-Centric Marketing Strategy
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