The Three Stages Of A Downturn

In a study of 375 of the Fortune 500 companies, Bain & Company identified three stages to a downturn and two contrary behaviours to each stage. The stages are:

1. Storm clouds – the first sign of trouble.
2. Wet and rainy weather – sales plunge.
3. First rays of sunshine – customer purchases increase again.

What the Losers Do

In Bain’s study they found that the ‘losers’ respond to each stage ‘intuitively’. At each stage, losers:

1. Exude confidence – don’t alarm the team or the market.
2. Slash costs – reduce staff, quality and services.
3. Spend lots – regain momentum, make it up to staff and customers.

What the Winners Do

Winners act counter-intuitively. At each stage, they:

1. Reality check then plan – they provide their team with an objective analysis of their situation and share their contingency plans.
2. Partner – they treat staff and customers as partners, take a “we’re all in this together so let’s work out how to get through these tough times”, and favour action over analysis, often buying up faltering competitors. (That strength message again.)
3. Ramp up – because they’ve maintained capacity there is no need to “jerk into gear” to meet a rising market. They are well placed to ramp up activity first, then resources to keep pace with their market.

What the Winners Get

There is researched evidence across similar companies showing that those with little or no lay-offs in a downturn significantly outperform those with larger lay-offs.

The maths for this is simple: As most downturns last an average of 11 months, wage savings from lay-offs are more than offset by the combination of severance costs, declined productivity, rehiring costs and training.

Three Basic Sales Strategies for Softening Markets

Here are three strategies proven by winners to work in a downturn:

1. Count your chickens. Make sure that you are looking after your existing customers better than usual (if that’s possible) because there’ll be plenty of hungry competitors out there ready to do anything to steal them from you. If you step up first, and raise service levels when everyone is talking doom and gloom, you’re going to be a beacon in the dark, and attract both old and new customers alike. You’ll also raise the bar so high your competitors will waste a lot of valuable resources trying to jump over it.
2. Find your lost chickens. Lost and lapsed customers – and ones you just plain mislaid, are still more likely to buy from you again, than is a new client. So it makes sense to go back, find those lost chickens, apologize, crawl over broken glass if need be and win them back into your pen. We all lose customers in good times for the simple reason that sales people like the thrill of chasing new customers more than the drill of looking after old ones, so there will be lost chickens on your books. If you dropped them because they would not meet your price, see if there is a way you can meet their price point profitably with an economy offering.
3. Steal someone else’s chickens. With competitors cutting service levels you have the perfect opportunity to raise yours (having first done it for your own customers, you should be good at it!) and steal their chickens. If you’ve retained all of your sales force when the market is rife with tales of lay-offs, you’re in the perfect position to ask your entire sales and service team to step up to a new mark and secure their company’s future (they know they are thereby securing their jobs, so you don’t need to raise this as a threat).

The Odds Are in Your Favour

Here are some interesting odds calculated for four types of sales behaviour. They might not be precise for your industry, but I’ll guarantee their relativity is accurate regardless of your market:

1. Sell a current customer a current product: 2:1
2. Sell a current customer a new product: 4:1
3. Sell a current product to a new customer: 8:1
4. Sell a new product to a new customer: 24:1

Winning Sales Strategies

1. Improve your pipeline management. In good times sales people tend to tolerate a certain amount of wastage from their pipeline (the flow of people who are at various stages of the buying process). In bad times, they’ll sometimes hang onto non-buyers to comfort them that their pipeline is still healthy – when it’s not! (We do a lot of work in this area, and there is insufficient space for detail here, so please email me if you’d like more).
2. Improve your selling process. Again, when times are easy, selling processes can get sloppy and still bring in the bacon. In tight times, a better level of performance is needed just to get by, so review and then improve your team’s overall performance at the coalface. (Again, this is one of our training specialties, so email me for more, please.)
3. Improve your activity rate. Contact more people and run a better process while doing that. Add more prospects to your pipeline, increase your follow up rate and frequency, raise your standards all around.
4. Count everything. Selling is a numbers game and results always improve when you subject its various stages to analysis, reflection and feedback.
5. Hold your pricing and increase your value. Giving away margin in tight times will only add to the negative effects of having to work harder for the same sales dollar – if your cost of each sale goes up because you’ve had to raise the bar to compete (or dominate) then, more than ever, you need to maintain margin. Instead of cutting price, add value, improve service, follow up, relationship build. Don’t be surprised if this pays off in unexpected follow-on sales.

How Do You Bring About the Changes You Must Make?

Coaching is about guiding clients to make the internal, personal changes that must precede the external behavioural and cultural changes their business needs. The coaching process is largely enjoyable for both parties (I’d say 89% of the time, referencing the stats I quoted at the beginning of this article), and challenging 11% of the time as we approach the change points.

If you’d like to know more about how coaching with me can assist you to thrive in tough times, and to achieve your goals more quickly, with less risk and more certainty, please email me.

Acknowledgement: This article arose from reading an article by Robert Miller that fitted with much of the guidance emerging for my coaching clients over the last five months. If you’d like a copy of the original, thought-provoking paper, just ask.