| I know Its hell out there |
| Wednesday, 11 March 2009 05:02 |
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For SMEs the recession means an unprecedented level of anxiety about the future. But what can be done?
We may have experienced a recession before, but this recession is different. While the direct cause may be the bursting of an enormous and unsustainable debt bubble, the effect is the global failure of the financial system itself. For SMEs it means an unprecedented level of anxiety about the future. But what can be done?The answer to this is both psychological and commercial. Firstly, we need to avoid ‘herding’, the instinct to follow the crowd regardless of the consequences. There is no doubt that this instinct was behind much of the behaviour of analysts, traders and others in the financial sector that created this mess in the first place. Their collective blindness to the risks they were taking was reinforced by a feedback loop that allowed them to maintain their optimism – and their bonuses – in the face of impending disaster. Now that this optimism has become a deep and unprecedented pessimism, we must avoid becoming paralysed by fear and anxiety about the future, otherwise we will inhibit the very resources that drive recovery. In the words of Franklin D Roosevelt, who came to power in the midst of the Great Depression, ‘We have nothing to fear but fear itself.’ However, a certain degree of anxiety is of course both inevitable and helpful. As any evolutionary psychologist will point out it was anxiety about their safety that protected our ancestors against predators and enabled them to pass on their genes to future generations. The problem we have in the 21st century is that we have not evolved to deal with the kind of complex crisis we now face, a crisis compounded by the fact that our brains struggle to make sense of the amount of information we have to process. We have created more information in the last 30 years than in the previous 5,000 and our conscious minds can process only a very limited amount of information at any given time. Is it any surprise, therefore, that we become anxious when confronted by the slightest problem, let alone the collapse of the global financial system? So, amidst all this noise, how do we focus ourselves sufficiently to be able to separate advice we need to listen to from that we need to ignore? As a rule of thumb, if you’re listening to an expert, by all means listen but be sceptical. The psychologist James Shanteneau found that experts disagreed about 50% of the time, which means that you are just as likely to get valuable advice about the prospects of financial recovery from a cab driver as a leading financial expert. This poverty of expertise is especially true when forecasting a future based on the activities of individuals and systems whose behaviour is subject to sudden, unpredictable swings and is often less than rational. However, even in the face of chronic uncertainty, we still have to act and when Cognition is asked to offer sales and marketing advice to SMEs we start with the following: If you are not in a commodity market, hesitate before cutting your prices and if you do cut them, frame it as a positive move not an act of desperation. This will ensure a current price cut does not damage future brand equity. In sales, do not let your anxiety to close the deal force you to negotiate too early. Research undertaken by Neil Rackham has shown that sales people who negotiate late and little, sell more and maintain their margins. Be confident and if you don’t feel confident, act as if you are – no-one will know the difference. Think carefully before cutting your marketing spend. Research has shown that companies who did this in previous recessions recovered at about a third of the rate of companies that didn’t. Integrate your marketing channels with sales, logistics and operations and unless there is a compelling reason to do so (and I can’t think of one) do not use more than one communications agency. By using an agency that can deliver all marketing channels in-house you lessen your agency management time by about two thirds and your messaging will be more consistent. In general, use those communication channels, particularly digital, PR and direct marketing, which are most measurable. Even in good times, large scale advertising is wasteful for most SMEs – in a downturn it is suicidal. Above all, stay in control of your basic business processes, do not let fear and anxiety drive you into either inertia or excess and, if all else fails, find a good cabbie and tell him your problems.
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