There has been a lot of debate among entrepreneurs lately about what to do in these uncertain times, especially when it comes to the choice between preserving what you have and building more opportunity.
Should you focus on hunkering down and cutting expenses and preserving what you have right now? Or should you focus on opportunities that you can take advantage of and leverage?
We can take a lot of inspiration from past events. History repeats itself, after all.
In the late 1920s, there were two companies that dominated the packaged cereal market: Kellogg and Post. When the Depression hit, Post dialed back on all their efforts — R&D, advertising, basically everything that they were doing.
Kellogg had doubled up on its advertising budget. It started spreading out into radio. It introduced a new cereal named Rice Krispies. Kellogg’s profits had risen by about 30%, and it became the industry’s most dominant player in the packaged cereal market.
There are countless other examples of companies innovating and succeeding when the greater economic landscape is chaotic or downright awful.
Kraft introduced Miracle Whip in the 1930s and it became the best selling dressing. Apple introduced the iPhone in 2008 when the Great Recession was really hitting its stride. The depths of a recession is not usually an ideal time to introduce a luxury, high-end, expensive mobile phone, yet we all know how that ended up paying off for Apple.
Many companies instinctively act like Post: they cut spending, they press pause on the business, and they wait for the good times to return. This is done purely out of self-preservation, and human beings are inclined to protect themselves in times of struggle and seek what they perceive to be the safest option.
Studies show that companies that continue to invest and increase spending on R&D, growth, their team, hiring, and advertising during recessions do significantly better than the ones that make big cuts. And not just short term, these companies do better in long term as well.
There was another study in the 1990s that showed that the companies that remain market leaders were the companies that had been the challengers to the previous market leaders during downturns. These consistent market leaders were the ones that increased their ad budgets. They were the ones that increased their investment in their team and in their staff.
The companies that were at the bottom of the pile, that struggled the most, that took the biggest hit, reduced them.
Bain & Company did a study that found that twice as many companies leap from the bottom of their industries to the top as they did the year before that recession hit.
Recession or not, difficult times create more opportunity for challengers, not less. That is when people who are not market leaders become market leaders.
If you maintain a long-term outlook, there’s never been a better time to invest in your business, in your team and in yourself.
There are two kinds of failures. One is sinking the boat: You wreck the company by making a bad bet. The other one is missing the boat, which is you let a great opportunity pass you by.
There’s a huge opportunity in the world of social media at this time. The Coronavirus’ impact on human behavior and logistics has created a much more viable social media audience.
If you look at social ads right now, the CPM (the cost per thousand impressions) is down by 30%. Running ads right now is 30% less expensive to reach the same amount of people, and consumption is up 300%.
The reason the CPMs are going down is because a lot of advertisers have pulled back — which means the ad costs are significantly cheaper. You can now reach more people for significantly less than you could before.
The fact that people are consuming more content now than ever, means you can reach more people, more often.
Watch time has been at an all-time high, even if you aren’t doing paid spend. Organic reach (the people you reach without any paid promotion) is up right now when it was precipitously decreasing for years prior
This all begs the question: what are you doing during this time? Are you focusing on preservation and cutting expenses or are you focusing on dialing in on opportunity?
Crisp Founder & CEO Michael Mogill would love to hear what approach you’re taking to guiding your business through this time.
You can text Michael personally at (404) 531-7691.