Don't Try To Save Your Way To Prosperity

[Michael Brown]

Don't Try To Save Your Way To Prosperity

Dave Laurenz is one heck of a sales executive. His philosophy is that sales cover up a lot of evils. As long as he has orders, Dave figures every other problem is manageable. He figures that tough times mean he needs to grab even more business from his competitors. So when times get tough, Dave gets more aggressive than usual.

Dave has the right attitude and philosophy. Unfortunately, too many companies fall sway to a bean counter mentality. They try to save their way to prosperity. It doesn't work that way. When the marketplace is contracting, the knee jerk reaction of the bean counters is to slash and burn. They play lumberjack with the budgets, often cutting back on advertising and marketing at the very time the company needs all of the marketing and advertising it can get.

Of course, frivolous spending should be curtailed, as it should in good times (if it is frivolous). Some essential, but discretionary expenditures may even need to be delayed. A truck replacement, for example, may be put off a year.

Marketing and advertising, however, is neither frivolous nor discretionary. Think about it. The market is contracting. There's less business to be had. So this is the very time you reduce the efforts you make drum up new business? It's crazy.

It's crazy, but that's exactly the way many people think. They cut back. Meanwhile, an aggressive competitor keeps his business-building activities steady or increases them. Given your reduced efforts, he encounters less competition and grows. When the market recovers, he rides the recovery to new heights having gained share in the downturn.

Recently I talked with a small business owner that sold his company. He was flabbergasted at the decisions made by the new owner. The market was down, so they started cutting SG&A. Marketing took a big hit. Not surprisingly, business got even worse. In response, the braniacs that bought the company started cutting payroll, and actually fired the top producer because he was earning too much. Get this: the top producer was paid straight commission. He was paid a lot because he produced a lot.

The top producer didn't have to worry. The competition snapped him up in a heartbeat. Others read the writing on the wall and left of their own accord before they could be fired. This once proud company is now 25% of its pre-sale size, hemorrhaging cash where it had previously been one of the most profitable in its industry.

Laugh if you want, but this is not unusual. I can cite example after example of big and small companies self-destructing by firing their best salespeople and slashing their marketing and advertising.

I can also give you examples of companies that did the opposite. When I worked for Dave Laurenz, I ran a business unit that was highly dependent on high-rise office construction. I started with the company at the exact moment high-rise office construction went into a

free-fall. It didn't stop until it fell 34%. Now that is a contraction.

Yet, through it all Dave never wavered. He increased advertising. We accelerated product development schedules. Dave was the most aggressive sales executive I've worked for. I don't remember how much sales increased for the company, overall. In my division, we increased an average of nearly 7% per year through this period.

That's not spectacular except when you consider the high-rise construction collapse. Then, it's extraordinary. We gain nearly 10 full points of market share and became the world leaders for the product category. But it shouldn't be a surprise. Our competitors pulled back. We stepped up and filled the void, taking our share and some of theirs.

Don't try to save your way to prosperity. It can't be done. Instead, aggressively pursue the business. Now more than ever, your marketing and advertising must carry you. During times like these you cannot afford to take out a big yellow pages ad and wait for the phone to ring. You've got to make it ring. and that requires an investment.