Presentation on theme: "How to survive a recession"— Presentation transcript:
1 How to survive a recession Banishing Bad Thoughts (1958) In Kankakee, Illinois, USA, members of the Chamber of Commerce staged a mock execution of "Old Man Gloom", as part of an effort to rally local spirits.How to survive a recession
2 Dig the well before you are thirsty Chinese proverbDig the well before you are thirsty.Chinese proverbDig the well before you are thirsty.Chinese proverbDig the well before you are thirsty.Chinese proverbDig the well before you are thirstyChinese proverb
3 Workshop Objective What it is: What it’s not: Provide key learning on Recessions, case studies, research, examples and practical tipsHow to survive difficult economic climate while optimizing the businessUSA focused because of historical dataWalk out with few ideasInteractiveOptimisticWhat it’s not:Economist viewBankers view (BNR)Not recent as of yesterdayRecession expert’s viewPredictive
4 Table of ContentsStep 1: Stop talking about it ! Recession 101 Historical data Trends to consider Romania survey and findings Recession 101: Key Learning Step 2: Businesses that do well Industries in high demand through a recession Jobs in high demand through a recession Step 3: Cut costs with a scalpel, not a chainsaw Other cost cutting strategies Step 4: Perfect time to plan Segment Management Ideas and trends for your customers Step 5: Over communicate End in sight - Significant events, milestones Outlook
5 Bank institutions searching for return on investments World liquidity excessRelaxation of loan termsAbundant creditOutburst of debt assignment by banksQuick development of ‘subprime’ creditAccumulation of financial market risksResale with profit possible in case of loan defaultReal estate market turns around for the worstMore and more subprime loans defaultMarket recognizes presence of loans being assignedConfidence voidLiquidity crisis, banks are no longer giving loans between them
6 Quick development of ‘subprime’ credit Accumulation of financial market risksReal estate market turns around for the worstMore and more subprime loans defaultMarket recognizes presence of loans being assignedConfidence voidLiquidity crisis, banks are no longer giving loans between themBanks ailingAssets depreciationBank lossesFinancial Crisis
7 Increasing of liquidity problems Financial CrisisEconomy slowing downIncreasing of liquidity problemsHouseholds having payment difficultiesUnited States stimulusInterestrate fallRefining problemsExpansionist budget policyHousehold payments guaranteeLiquiditiesinjectionMore flexible monetary policyImproved (attractive) fiscal policyIncreasing losses for banks
8 Increasing losses for banks Interbank loan guarantees, Paulson PlanIncreasing losses for banksConfidence being further erodedStock market collapseHouseholds are more and more worriedBankruptcy or near- bankruptcy of financial institutionsSpeculationStopping stockmarket collapseCapital injection, nationalizationsDepositguaranteeCoordinated monetary policyState interventionRecession
9 Step 1: Stop talking about it ! Recession 101 USA Vs. RomaniaDefinitionRecession is loosely defined as two consecutivequarters of decline in GDP output.National Bureau of Economic Research(NBER, USA)extensive definition: four mainfactors as the most important for determiningthe state of the economy:EmploymentPersonal incomeSales volume in manufacturing and retail sectorsIndustrial productionQ. Is USA in a recession? A. YesQ. Is Romania in a recession?Not yet technically, but discussion of‘Criza’ has stifled everything since:BNR reduced debt /income ratio from 70% to 30%Purchase of homes added VATBanks changing policies on loansSub Prime effect in USA affecting global banks and world markets
10 Recession 101Business cycle is made up of four different periods of activity extended over several years.These phases can differ substantially in duration, but are all closely intertwined in the overall economyPeak At its peak, the economy is running at full steam.Employment is at or near maximum levels, gross domestic product (GDP) at its upper limit, income levels are increasing. prices tend to increase due to inflation; Businesses investors are enjoying prosperous timeRecession “What goes up must come down" applies. After experiencing great deal of growth success, income and employment begin to decline. As wages, prices of goods in the economy are inflexible to change, they likely remain near the same level as in the peak period unless the recession is prolonged. The result is negative growth in the economy.
11 Recession 101Expansion/Recovery - In a recovery, economy is growing once again, moving away from bottoms experienced at the trough. Employment, production and income all undergo a period of growth, overall climate is good.Trough - sometimes referred to as a depression, depending upon the duration of the trough, this is the section of the business cycle when output and employment bottom out and remain in waiting for the next phase of the cycle to beginSo where are we?RomaniaUSA
12 Historical dataCurrent recession is one of longest downturns since the Great Depression of 1930's.Last two recessions ( and 2001) lasted eight months.
13 Trends to consider U.S. Recession As chart indicates, the U.S. budget deficit is expanding at its fastest rate in the post-war era. Obama’s proposed fiscal stimulus will add to this deficit. This aggressive fiscal response is meant to offset a sharp contraction in GDP.
14 Trends to considerSource: 2009 Outlook – Council on Foreign Relations, November 2008The unemployment rate initially increased at a rate consistent with past recessions.However the latest data suggest a worse than typical environment for employment.2009 will start to reveal how much worse the employment situation will be.Unemployment, now at 4.9%, is just 0.9% higher than the 4% level that economists consider "full employment" (meaning that everyone who wants a job has one).
15 Auto sales typically fall by 20% in a recession This time around they have fallen 30%.Source: 2009 Outlook – Council on Foreign Relations, November 2008Consumer sentiment starts falling before the recession begins, but turns around soon after.However, pessimism seems particularly strong this time around.Source: 2009 Outlook – Council on Foreign Relations, November 2008
16 B2B payments Payment delays lasted between 18 and 24 months First oil crisisSecond oil crisisUSA RecessionInternet bubble and 9/11Subprime crisis%82001807160614051204100803602401In slide-ul 4 este prezentata legatura dintre crizele de credit si incidentele de plati dintre companii (tranzactii comerciale care nu au fost platite la termen) ). Pana acum au existat 5 crize ale creditului, criza subprime avand cea mai mare amploare. In aceste perioade cresterea economica a fost redusa. In astfel de perioade se poate observa o crestere semnificativa a incidentelor de plata.20197019711972197319741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008 (e)2009 (p)World economic growthPayment incidences index (base100= world average )Source: Loan Risk Administration, Coface Romania
17 Payment difficulty index 2008 evolutionFirst 11 months. yoyUnited States66%Great Britain64%Spain131%Ireland70%World level47%0%50%100%150%DC+C-B-ACA+A-BB+MAJOR RISKMINIMUM RISK2008 rating fallDC+C-B-ACA+A-BB+MAJOR RISKMINIMUM RISK2008 rating fallWestern EuropeNorth AmericaITTelecommunication (suppliers) / Steel / Paper / Pharma / ChemicalConstructions / Air transportationTextileAutomotive Ind.RetailTelecommunication (equipment) / Equipment Ind./ Electronic partsIn slide-ul 5 se poate oberva ca in primele 11 luni din 2008 incidentele de plata dintre companuu (tranzactii comerciale care nu au fost platite la termen) au crescut cu valori alarmante fata de aceeasi perioada anului 2007.Automotive Ind / ConstructionTextileRetail / Equipment Ind / Telecommunication (equipment)Telecommunication (suppliers)Paper / ITSteel / Pharma / ChemicalElectronic parts / Air transportationSource: Loan Risk Administration, Coface Romania
18 Financial crisis in Romania High ticket consumer goods sales fell 10-30% in Nov/Dec 2008 vs 2007Dacia sales fell 16,7% in 2008 and 55% in Dec compared with Dec 2007Real estate transactions fell 70% in 2008 vs 2007Exports fell 17% in December 2008 Vs. Dec 2007Large dismissals forecast for H109. Dismissed employees at end of 2008 will lead to a possible 8% unemployment rate in 2009Most affected industries: construction, metallurgie, automobile,, petrochimie Detail (Electronique et biens durables)Azi 19 ian cursul oficial 4,2917. S-ar putea sa fie depasit pana pe 21.Source: Loan Risk Administration, Coface Romania1818
19 Loan risk new vision Client credit can no longer be overlooked Vital to have most recent information about each clientAccounts receivables becomes priority over sales growthAny negative information about a client must be analyzed carefullyQuick reactions imperative regarding any payment delays or negative informationCompany’s financial health no longer enough to grant commercial creditTraditional business relationship no longer a security elementIn times of crisis no company can be considered a good payerSource: Loan Risk Administration, Coface Romania
20 What needs to be done? Restrict credit limits Previous credit limits need to be adjusted with today’s market situationFocus on most recent data about your clientsSeek additional quality information for new customers: industry trends, receipts and payments, lines of credit, guarantees and assets.Exchange information between industry players (Vodafone/Orange)Be attentive to negative information: slow or no payment incidences, payment ultimatums, State dues.Good financial standing no longer a guarantee, industry wide risks need to be considered.Coface suggests companies to not rely on one two major clients. Suggests smaller, frequent sales amounts, shorter credit terms, portfolio diversification .Source: Loan Risk Administration, Coface Romania
21 Romania Survey and Findings Successful organizations Increased marketing expenses during recessions!Do this effectively, taking into account customer needs, expectations and market information. The Financial CrisisMeter* (Mercury Research) enables Romanian companies to anticipate effects of crisis.Research Findings – issued on 14th of January 2009 (continued during February – July 2009):1) Romanians are highly exposed to mass media information about the crisis: 63% declared they watched either occasionally, or constantly information about the crisis and only 4% did not hear about a financial crisis. Bucharest residents and higher educated people pay more attention to crisis related news than other categories investigated.2) Survey confirms a strong pessimism during this time: more than half of respondents (53%) slightly more concerned about current personal financial situation compared with six months ago.3) There is lot of uncertainty about what it might happen. Romanians show high concerns for: income decrease, making debts, not being able to pay them, not able to maintain same life style (34%).*Continuous tracking (17 November – 10 December 2008; 18 – 31 January 2009; 18 – 31 March 2009; June 2009) of two categories of indicators: Personal money management and potential concerns and Trust in the Romanian financial industry. Find out what adults from Romania – people aged feel and plan during the current economic context – from a national representative sample of 1100 respondents (high accuracy level – max sampling error ±2.9%), interviewed through face-to-face methodology in Mercury Omnibus.Direct relationExposure/ information degreeOverall concern of Romanians
22 Romania Survey and Findings Research Findings – issued on 14th of January 2009 (Continued during February – July 2009):4) However, direct effects of crisis are better acknowledged by more informed respondents. Higher degree of information, the higher the concerns about:Are Romanians going to adjust family budget? If economical situation worsens, people probably reduce expenses for main categories in family budget: food (Retailers – should pay attention to merchandising to weather the recession), clothing and shoes (higher demand for used clothing?), house expenses. Also, level of income and education are important differentiators when it comes to budget adjustment strategies.Losing the jobBeing unable to save/ invest as much as usualBeing unable to pay the loan installments
23 Recession 101: Key Learning Can we compare to great depression??Ben Bernanke, Chairman of the Board of Governors US Federal Reserve, a scholar on the Great Depression, said the Fed has learned from errors policymakers made in that era.Fed made two critical mistakes in 1930s - maintaining overly tight monetary policy and allowing financial system to collapse. Fed proactively reduced rates from 5.25% in September 2007 to its current historic low and injected unprecedented amounts of liquidity into the financial system.Absence of bank deposit insurance at time caused catastrophic erosion to household wealth and consumption. Today, FDIC insurance ( recently elevated limit to $250,000) provides significant cushion; Response of economic policymakers is immeasurably faster and more aggressive nowAverage length of ten recessions since World War II = 10.4 months, with range of 6 months in recession to 16 months in ,.Ntural "placeholder" time frame for the end of this recession would appear to be midHowever, given that recession is now 15 months old, not approaching its trough yet, raises distinct prospect that it will exceed the length of the and recessions (both at 16 months),Critical question: What kind of recovery is likely to follow? Answer: probably a gradual one, unlike the more typical pattern of past recessions roaring ahead, propelled by pent-up consumer demand
24 Recession 101: Key Learning Romanians are:ConsumersHave traditionally been saversRelatively debt free vs. West Europeans and North AmericansCan more easily persevere the effects of a recessionThe ultimate cure of a recession is letting it run its course."The financial media often takes on a "sky is falling" mentality when it comes to recession. Bottom line is that recession is a normal part of the business cycleWeekly good news storiesForeign investors’ stakes in companies operating on the Romanian financial market tripled in October 2008, foreign capital flow on financial market reaching EUR 4 bln.Pirelli: Assemblies plant Bumbesti Jiu, estimated to open Q1 of In Q408, Pirelli announced it would add EUR 250 million to current investments in Romania, develop industrial hub in automotive industry. By 2011, the total investments will reach EUR 500 million.Financial chain Millennium Bank started planned expansion in Romania for 2009 with new branch opened in Suceava. Bank plans to open branches in 9 cities H109.Carrefour exceeded the EUR 1 billion threshold in sales in Romania in 08, 37.4% more sales over previous year, to EUR 1.19 billion.Axa Group has put EUR 6.2 million into a residential compound of 33 luxury apartments in the Baneasa area, planned to start March 09.Jan. 03, 2009 Procter&Gamble will invest €100 million in second factory in Romania (hair care products) in Urlati, Prahova County. One few Greenfield projects in Romania.China is alarmed that it will only have 8% growth in instead of doubel digitThere is no recession in Lebanon. Banks were not permitted to lend abroad
25 Personal approach to the Recession In a downsizing economy, the best return on investment for your career may be to focus on your currentjob. How?Think of ways to generate revenues or cut costs. Concentrate on finding places to pinch pennies, or identifying cheap new sources of revenue. Or both.Be visible. This isn't the moment to take an extended vacation. Your position could be eliminated while you're gone. Do not come ‘rolling in at ten o'clock’. Figure a way to stand out and distinguish yourself. If you're in sales, get your numbers up. Nobody will be laying off star salespeople.Talk up your contributions. Make sure you're adding value at work by going above and beyond your basic job responsibilities..Keep a broad perspective. Don't get a reputation as someone who only does what he or she is told to do. Pick your head up, look around, and get in on the action. Volunteer for crucial responsibilities, including tasks for which your boss is responsible.Get your skills up to date. Companies get rid of people whose skills are obsolete and replace them with people who are already trained. Join trade organizations and prove you're plugged in. Consider going back to school, show your employer you're serious about your career and performance.No whining allowed. Attitude does count – a lot. Management wants people who can boost morale during tough times. Happy workers are less likely to get laid off than people who dislike what they do. If you grumble about your job all the time, then maybe giving you the sack would really be doing you a favor.
26 Step 2: Businesses that do well Contrary to popular belief, some companies do well and even better during a recession
27 Industries in high demand during a recession Food retailers. The Food industry less affected in recessions because people have to eat i.e. Maslow’s fundamentalneed # 2. Consumers may cut back on luxury food items but in times of continuous financialpressure, people might spoil themselves by buying food items little more expensive to’ forget about life fora while” Wal-Mart whose sales rose 3.4 percent in November ‘08, is a big beneficiary of consumers' downscaling..Wal-Mart drives for more Mass. grocery business, The Boston Globe, February 10, 20092) Entertainment. One axiom that grew out of the Depression was that, in bad times, people go to the movies Box office data from more recent downturns show conflicting signs on ticket sales: rose in the recession in the early 1980s.3) Chocolate: Recession-proof. "In volume terms, growth in the premium chocolate segment has slowed somewhat in recent months as a result of the global economic crisis. However, in value terms, this category is still growing," said Josiane Kremer of Switzerland-based Barry Callebaut. “Brands that have the highest quality and offer superior taste [that] are backed by strong brands already will probably have an advantage,"4) Many US lotteries across the USA are experiencing record sales, driven by intense marketing, people who trying to turn a lottery ticket into a ticket out of hard times. “When people view themselves as doing worse financially, they purchase lottery tickets,” Emily Haisley, Yale School of Management who published research paper on lotteries in The Journal of Behavioral Decision Making. The Gambling industry (casinos, sports betting etc) might be resilient to the current crisis in Romania despite some well known casinos have announced important losses lately.
28 Industries in high demand during a recession 5) Video Games: Goldman Sachs forecast report predicted unlikely winner among media choices.“Video game sales are in the home and, frankly, video games are perhaps the cheapest forms of entertainment on a dollar per hour basis ”Nintendo seems to have bucked the recession. Japanese video game manufacturer doubled November sales of the Wii in the U.S. from a year ago, according to latest release on gaming sales.Wii over a latte. “Solid middle class going to make substitutions to buy games. Now it’s buy a Wii and don’t eat out for a month, or don’t take that ski trip,” “Or cut out Starbucks.”. “ Regardless of downturns, consumers pursue something fun," Mineo Koda , Nintendo said in an interview with The Korea Herald.6) Buyer and Seller of Used Office Computer Equipment, ( see ITLiquidators.com)cartridge refill companies7) Alcohol sellers.8) Auto Repair and Recycling9) Office Liquidators
29 Industries in high demand during a recession 10) Used Clothing11) Bankruptcy Attorneys12) Jewelry re-sale. Virginia-based company Goldrush has kiosks in malls asking customers to sell them gold and silver – at a fraction of its value – so they can melt it down and resell it.13) The Concert Business grossed under $4 billion worldwide in 2008, most ever for a year up almost 13 percent over last year, according to Billboard magazine. "Overall, it's been a pretty good year for touring," said Ray Waddell, who covers industry Billboard. "I'd never say it's recession-proof, but it's resilient."14) Indoor sports facilities. Developers say a number of factors make them confident . When families cut back on vacations, they're likely to keep their children busy during school breaks with activities like indoor soccer camps . People cut back on luxury trips and going to a fancy restaurant, but as far as youth sports, it's something people want to do for as long as possible,"15) Big-ticket luxury items will suffer, especially in the consumer electronics space. The exception will be so-called "smart phones”.16) Notebooks. Computer industry ships more portable computers than desktops, and part of the mix will be mini-notebook computers, known as notebooks. Computer makers will sell more than 11 million notebooks worldwide in 2008, up from one million in ’07. Stripped-down portables (no DVD drive, less processing power) have stripped-down price. Market leaders ASUS and Acer offer sub-$300 notebooks, and well as Dell and HP .Affordability of notebooks makes them an ideal solution in emerging markets,.17) Cloud services/computing. Software-as-a-service (SaaS) companies have long promoted themselves as more capital-efficient alternatives to installed software solutions. Instead of financing big software purchases and installation, companies can "pay as they go" under the cloud services model. Ex. Salesforce.com
30 Industries in high demand during a recession 18) Virtualization. Helps companies reduce cost of operating machines such as servers. Technology allows single piece of hardware to run systems or applications that previously had run on multiple machines – essentially allowing companies to squeeze more out of existing hardware and even defer new purchases.19) Broadband. American consumers are unlikely to part with their broadband connections, an Accenture study found.They are more likely to get rid of cable television channels (once considered practically a utility) or their mobile phones than their high-speed Internet connections. "It is absolutely recession-proof,"20) Residential trade contractors ) Medicinal & biological products 22) Medical equipment 23) Pet and pet supply stores 24) Passenger transportation 25) Consumer lending 26) Financial transaction processing and clearing 27) Portfolio management Services 28) Investment advice 29) Direct health and medical insurance 30) Self-storage centers 31) Tax preparation services32) Process and logistics consulting services33) Veterinary services 34) Security guards and armored car services 35) Elementary and secondary schools, Universities36) Ambulatory health care services 37) Physicians, Dentists, Specialty therapists38) Outpatient care centers and Medical laboratories39) Blood Banks40) Homes for the elderly / Child care41) Sports agents42) Zoos and natural parks43) Nail salons44) Local government administration
31 More industries in high demand Property companies Buying good-quality assets at distressed prices. Kept powder dry by staying in cash last year and now out to exploit opportunities thrown by current downturn.Pawnbrokers (Amanet). Hard-up consumers are selling jewellery for cash and pawnbrokers act as alternative credit source in absence of bank lending. Well-placed to benefit from tight credit conditions and economic contraction pawnbrokers continue to report strong trading and customer growth.Funeral director is one type of company that will definitely not run out of customers in hard times like the ones that we are facing.Specialist health and social care recruiter supplies nurses, pharmacists and specialist medical staff to the NHS and other health care organizations doing well during a recession - health care sector naturally resistant to recession – people still get ill in a downturn.Restaurant Group. This type of company could benefit from consumers' tendency to "trade down" in a recession. The outlets tend to be in retail parks, which are popular with families at weekends. Many people cut down on trips to expensive restaurants in lean times but will take their family out to see a film and a meal.
32 More industries in high demand Companies which supplies individuals' credit histories to lenders are doing well because knowing what your credit rating is has never been so important (coming soon in Romania).Door-to-door credit company. More borrowers are being turned down by mainstream lenders and forced to look further afield (Provident Financial Romania).Insurance companies. Global shortage of capital in the insurance industry, as a result of the credit crunch. Absence of new competitors puts established players with access to reliable pools of capital .Company specialized in online trading services for retail, professional and institutional customers. Market volatility creates more interest in such a market, so demand is high.
34 Product /services revenue growth, last 12 months No.IndustrySales Growth1Farm Product Raw Material Wholesalers21.70%2Support Activities for Mining17.76%3Remediation and Other Waste Management Services14.85%4Navigational, Measuring, Electromedical and Control Instrumesnts Manufacutring14.80%5Software Publisher14.18%6Beverage Manufacturing13.69%7Other Telecommunications13.46%8Support Activities for Agriculture and Forestry13.44%9Waste Collection13.34%10Direct Selling Establishments13.33%11Medical and Diagnostic Laboratories13.12%12Other Food Manufacturing12.41%13Medical Equipments and Supplies Manufacturing12.26%14Accounting, Tax Preparation, Bookkeeping, and Payroll Services11.87%15Employment Services11.54%16Security Services11.23%17Outpatient Care Centers11.08%18Electrical and Electronic Goods Wholesalers11.04%19Bakeries10.84%20Business Support Services10.81%21Management of Companies and Enterprises10.78%22Computer Systems Design and Related Services10.77%23Special Food Services10.18%24Metal and Mineral (except Petroleum) WholesalersIndustries from USthat have experiencedsignificant sales growthin the last 12 months(2008) - privatelyowned companiesonly.Source: Sageworks, Inc. Sageworks, Inc.
35 Local Headlines: Industries in high demand Food retailersCarrefour, Metro have made investment commitments in last few months to build more stores in Romania.Selgros Cash&Carry chain, plans to invest some €30-40 million this year in two new stores, create 600 jobs. Business Standard, February 10, 2009Trident hypermarket, supermarket networks will recruit 550 persons in 09 part of expansion plan, including Bucharest market. Business Standard, February 4, 2009Mega Image supermarket chain, continue expansion strategy, speed up the introduction of own branded products in stores, create 360 new jobs in 2009 Business Standard, February 6, 2009The Profi discount retailer, posted a 49 % annual rise in sales in January, most significant increase on first-price product segment, surged 150 percent year-on-year. Business Standard, January 24, 2009Carrefour posted a 12 percent annual increase in sales of own brand products in January, considering orientation of clients towards less expensive products, own brands, and promotions. Business Standard, February 27, 2009Travel industryHappy Tour Romania, the largest local travel agency, focus its strategy on maintaining its corporate client portfolio.“For 2009, we will focus on large, corporate clients, on maintaining and consolidating our client portfolio, and even expanding this.This is a year of crisis, and now, more than ever, people will want to get away from the stress and pressure of their jobs and day-to-day problems
36 Jobs in demand through a recession The folks at Cisco want to hear from you. A survey commissioned by Cisco in July 2008 shows there will be a shortage of 60,000 of these workers through 20111) Networking and Systems Administration. Movement towards online systems integration has trended upwards over time. As hackers continue to create new ways to compromise integrity of systems they attack, increasingly important for networks to be iron-clad-secure,maintain user trust and apositive public image.2) Business Analysis, Software Implementation. Professionals work with companies to figure out which software best suits their needs. install the software and teach staff.3) Accounting and audit jobs: Tax work, auditing, preparing company's quarterly reports still goes on, tough economy or not.4) Health care. Half of the 30 fastest growing jobs over the next 8 years will be in the medical field5) Administrative Assistant6) Tracking Accounts Receivable7) Business Analysis, Research8) Software Design and Development9) Nursing10) Finance Staff
37 Jobs in demand through a recession (2) 11) Helping Commercial Borrowers: companies help buyers of commercial real estate — multifamily apartments, office buildings and shopping centers — who want to take over the sellers’ mortgages, rather than get new loans. Buyers may now have no other financing choice than to assume or take over the sellers’ mortgages.12) Liquidating Machinery and Inventory: Banks dealing with troubled companies, need to liquidate business property acquired through foreclosures. Monitoring declining asset values of companies that had pledged their inventories and accounts receivable as security for loans. Auctioneers who travel the country, get 12 percent commission for selling off business assets. Even in a soft market, there is always a buyer.13) Advising Troubled Companies, restructuring advisers, are directly countercyclical to economy. Financial distress, both before and after bankruptcy, ex. liquidity problems, expenses outpacing revenues; exhausting credit at financial institutions; or creditors, once lenient in a tight cycle, may now be demanding payment. “Maintaining liquidity is probably the most important thing you can do.”14) Green Energy/Global Warming. Specifically, battery technicians, wind, solar, CO2 emissions technology, nanotechnology, materials sciences, natural gas exploration and infrastructure, and nuclear.15) Sales representatives and account/customer support. Companies view current economic slowdown as opportunity to steal market share as competitors cut back, when the economy emerges to come out stronger than ever. To do this, they need right talent to interact with external world.16) ActuariesAs pension funds are hit by the volatile markets, trustees are turning to their actuariesand pension advisers to maintain the stability of their schemes.
38 Startups in a DownturnQ. What does Cisco, Oracle and Google have in common?They were started in the worse possible economical times.Lessons learned:1) Makes sense to do research and development counter-cyclically.2) Recessions can be really useful strategic opportunities.3) Everything is cheaper during downturn, including cost of labor, materials, office space.4) There’s less competition, both from incumbents putting out their own fires and startups finding it harder to raise money.5) Tough times force entrepreneurs to work on business models earlier, end up reaching profitability more quickly than when money comes cheap. “The companies are tougher because they were tested during a tougher time”.6) Lotus software - another survivor. Owner said “If a product meets an unmet need, it doesn’t matter if the economy is bad”.
39 Case Studies - HP Hewlett-Packard Summary. HP born in a Palo Alto garage at end of Great Depression, January 1, Electronic company, initially supported by a mere $538 investment, has grown into first technology business exceeding $104 billion in revenue in 2007.Revenue: $5369. Employees: 2What they did during Recession. After resisting global recession for most of 2008, Hewlett-Packard reported profit dropped 13 percent for the first quarter of 2009.New cost-cutting measures, including trims in employee benefits, salary reductions range from 2.5 percent for hourly workers to 20 percent of CEO's base pay.Some of money could be returned in bonuses for all employees, depending on the company's performance.CEO vowed to keep profits up by continuing to cut costs. September cut nearly 25,000 jobs, or 6 percent of its work force, over the next three years, to eliminate redundant positions from EDS.Expects to save $1 billion in operating costs through layoffs, other expense reductions in however, number of engineers working in R&D increased. "We're not cutting the critical innovation or sales resources," .Company would continue to invest in "so we emerge from this recession in a more powerful position.Results TodayOne billion customers in more than 170 countries on six continents.HP has 321,000 employees worldwide.HP's 2008 Fortune 500 ranking: No. 14$1.9 billion in profit.
40 Case Studies - VlasicSummary. Vlasic Pickles grew out of Detroit creamery, fresh pickle business begun by Croatian immigrant Franko Vlasic in 1920s. Vlasic's primary product, pickles packaged in glass jars, began production in 1942, during World War II, and the business rapidly expanded in the post-war years, corresponding with growth in per capita pickle consumption. Official website claims Vlasic was inventor of glass-packed, shelf stable pickle.What they did During Recession. Slashed the price of its products, it loaded them up into gallon jars and sold the oversized products at Wal-mart for $ less than the price of a quart of Vlasic sliced pickles found at grocery stores.Product worked for Wal-mart, garnered attention of consumers. Big jar-o-pickles screamed value to Walmart’s customers. Although, the fact that it was a jar of pickles didn’t really matter. What mattered was that it was a big, cheap jar of pickles!Vlasic was nothing more than in-store advertisement for Wal-mart’s Everyday Low Prices. Gallon jar helped company find its way to bankruptcy much more quickly. Its earnings evaporated.Price reductions do more than compromise earnings. They compromise customers’ perceived value of your products and services [your brand] which ultimately affects the long-term equity of the franchise.3 Dollar pickle jar…Thank you Walmart!Results TodayToday, Vlasic is owned by Pinnacle Foods since its name change in 2001
41 Case Studies - KraftSummary. “We’ve come along way since J.L.Kraft started selling cheese from a horse drawn wagon in Hard work, imagination and a commitment to bring the world its favorite foodsWhat they did During Recession.1933, Kraft launched its iconic salad dressing/sandwich spread Miracle Whip - again, not in spite of the Depression, but because of it.This new miracle mayonnaise spread had instant appeal to Depression-weary consumers grown tired of the boring taste of vegetables, salads, and sandwiches. Kraft Miracle Whip soon launched one of biggest food advertising campaigns to ever grace the U.S. media -- from print to TV. Initial effort led to 22 weeks of almost non-stop advertising, including weekly two hour radio show.Not only was Miracle Whip a one-of-a-kind new product, it was relevant. Innovation is not a “good times only” exercise. Innovation always matters. It must, however, be relevant to needs of the market. Within six months after initial launch, this uniquely relevant new idea outsold all other brands of dressing and mayonnaise,went on to become a mainstay in refrigerators across America.Results Today. With revenues of $37 billion, Kraft Foods Inc. is one of the world’s largest food and beverage companies.Kraft products are present in more than 99% of U.S. households.Kraft markets many of the world’s leading food brands. Nine brands with revenues exceeding $1 billion and more than 50 additional brands with revenues greater than $100 million. More than 40 of brands are 100 years old.Bllion dollar brands include: Kraft, Jacobs, LU, Maxwell House, Milka, Nabisco, Oreo brand, Philadelphia, and Oscar Mayer.103,000 employees worldwide, more than 180 manufacturing and processing facilities worldwide.
42 Case Studies - AppleSummary. Apple Inc. Designs and manufactures consumer electronics and software products, best-known products include Macintosh computers, the iPod and iPhone. Apple has established a unique reputation in the consumer electronics industry.What they did During Recession. In 2003, Dow at historical lows over a 10-year period, Apple continued to invest. When asked why he hadn’t reduced research and development spending when others in industry had experienced slow down, Steve Jobs recalls: “What has happened in technology over the last few years has been about the downturn, not the future of technology. A lot of companies have chosen to downsize, and maybe that was the right thing for them.We chose a different path. Our belief was that if we kept putting great products in front of [customers], they would continue to open their wallets.That’s what we’ve done. We’ve been turning out more new products than ever before, and Apple is one of the only two companies making money in the PC business. We’re not making a lot, but other than Dell, we’re the only one. Others are losing money – a lot of money.”Apple has history of remaining relevant during most difficult of times. Through innovation, Apple kept its pipeline robust, but – more importantly has remained in front of customers.Apple tells its story through new products.New products are not only required to remain relevant, they are signs of hope to employees and to customers that your company and your brand are valuable in their lives.Results Today.250 retail stores in nine countries and an online store where hardware and software products are sold.35,000 employees worldwide and annual sales of US$32.48 billion in its fiscal year ending Sept. 29, 2008.In 2008, Fortune magazine named Apple the most admired company in the United States.iPhone sales from that quarter surpassed RIM's BlackBerry sales of 5.2 million units. Up to September 30, 2008, the iPhone represented 39 percent (US$4.6 billion) of the company's total quarterly revenues,
43 Case Studies - Gillette Summary.Gillette is a brand of Procter & Gamble currently used for safety razors among other personal hygiene products. Gillette Company founded by King C. Gillette in 1901 as a safety razor manufacturer.In 1999 Gillette as a company was worth US$43 billion and it was estimated that the brand value of Gillette was worth US$16 billion. This equated to 37% of the company’s value, the same as DaimlerChrysler.What they did During Recession.Innovation is a good cost. Gillette’s 1990 introduction of its Gillette Sensor brand of shaving products.Launched in a recession, more than 8 billion Sensor razor blade cartridges and 400 million Sensors razors have been sold.By 1997, 49% of Gillette’s sales came from new products launched in the previous five years and R&D spending had reached $212 million.Results Today. P&G enhance its product performance and brand equity between these disruptive innovations with meaningful product and design initiatives every 12 to 18 months. In addition, they maintain a steady pace of commercial innovation.
44 Paper products manufacturer Case StudiesPaper products manufacturerWhat they did During Recession“Bad costs” involve investing in things such as fixed and working capital, manufacturing, and general and administrative expenses. Investing in such assets during recession - even though their presence is intended to yield cost competitiveness or improve productivity often do just the opposite.A paper products manufacturer in UK invested in building a state-of-the-art facility during the 1990s. The prevailing logic of the investment was that new automation could replace employees working in their warehouses and improve the efficiency in how they managed orders.In reality, profits actually fell not only because of high depreciation charges, but because of need to retain expensive consultants to “de-bug” the process, software, and systems.Customer service fell off dramatically as new system did not allow for flexibility in prioritizing and re-prioritizing customer orders based on immediate needs which led to a loss of business and a reduction in market share.To compensate, the company reduced its prices in an attempt to win back business only to see its margins erode even further.
45 So what…Your clients may have opportunities that you can discover/explore with them.Consider targeting some of these companies if you were not doing so in the past.Be creative by exploring different payment mechanisms instead of the typical supplier-client relationship, ex. pay for success, pay in 3 months, bonus on cost cutting.Change the way you sell products. Developer who sells new homes is offering ability to ‘rent to own’ which is a fairly new concept in Romania. For a small deposit and reasonable monthly payments, you can own your new home. At any time you can apply for a mortgage and pay the developer. Some conditions apply:Barter: If you can’t pay for something you can probably barter your services for other services and products.Re-sale of products. Some fashion shops in New York are buying used brand name clothing and re-selling after it was used only a few times. The Profit margins are good and customers get a sizeable discount off designer clothes
47 Step 3: Cut costs with a scalpel, not a chainsaw. Fortune magazine: 3 experts on how to cut costs:An executive of low cost airline, SVP at medical supplymanufacturer and consultant at Bain & co:Q1) How do I know where I am spending too much?‘Our team regularly goes each budget line by line. However cuts are made where there is the least impact on customers. We don’t take a chainsaw to cut costs – we prefer to be more surgical’.Bring in third party groups that specialize in benchmarking. ‘We compare our supply chain with companies like Wall-Mart’. We look at our systems to see if we have redundancies.Create a dedicated (cost cutting) team and have each person spends 50% of their time on it.
48 Step 3: Cut costs with a scalpel, not a chainsaw. Q2. Are there cuts that are worth making?Some will never be cut since it reinforces our corporate culture like bringing in customers into our head office to tell us how our products are doing.Prioritize. Take on cuts that are large, easy to implement like consolidating suppliers. Be careful with changes that bring small savings but come at a big cost like cutting off coffee for staff which may lower morale.Q3) What are some of the reductions that companies often overlook?Some companies don’t look at creative ideas to avoid layoffs. To prevent overstaffing consider voluntary leave program without pay or flex time - keep their benefits and you get a reduced payroll while having access to trained, on demand staff.50% of costs for most are associated with purchases. If you aim at your supply chain and those costs, you can avoid layoffs. It’s free money and easy to implement. Layoffs will cost you more in the long term when the market picks up again, and it will pick up again.
49 Other cost cutting strategies 1) Cash is King - liquidate assets and get rid of dead of stock. Start keeping some money aside in case the economy does indeed get worse.2) Good records - keep business records up to date to always know how you are faring. The more robust your records the easier it will be to move faster in the case of a slump.3) Batten down the hatches - When business is slow you have more time on your hands to look at ways of cutting costs.Cut down on wastage and examine all your outgoings to Remove/ reduce all unnecessary expenses.4) Speak to your lenders - Keep communication lines open with banks Discuss skipping payments (new in Romania.) You are asking to capitalize interest to later date. This extends term of contract but cash flow will help you temporarily Most Romanian banks are foreign owned, well known option in their home markets. Open talks with another lender just in case your bank pulls the plug.5) Examine your loans - in recession interest rates fall as government try harder to stimulate the economy - ideal time to collate all your loans, possibly switch to longer payment terms and / or fixed rate loans. The European Central Bank (ECB) has dropped interest rates by .5% to 2% and you could re-negotiate your Euribor loans to get better rates.6) Negotiate harder with your suppliers - Ask for longer payment terms, demand quicker delivery times to require less money tied up in stock. McKesson (generic drugs manufacturer) customers include big retailers under pressure to cut costs as consumers grow stingier. For those retailers, negotiating significant cost reductions from suppliers of generic drugs is tough, so McKesson offers them this proposition:“Buy all your generics from us and redeploy your purchasing team to projects where it can achieve bigger savings”.
50 Other cost cutting strategies 7) Improve your credit control - cash flow is king in recession so meet all customers especially delinquent. ones Send regular reminders and statements followed by a phone call the minute an invoice is overdue. Beware of clients faking payment problems. If you insist with the proper follow up you will be first in line to get paid.8) “Reduce the amount of credit extended to customers," says Scott Shane, professor of entrepreneurial studies at Case Western Reserve University and author of Illusions of Entrepreneurship. "Get the money fast by offering a discount" to those who pay up immediately.9) Videoconference instead of travel. Costco reduced in-person meeting costs with videoconferencing - 59 Managers that typically traveled began meeting virtually every other month. Savings: $750,000 US in 2008, $3-$5 million when they roll out nationwide. Consider using Skype.10) Increase your Marketing – Yes increase! This is worst time to reduce your marketing budget. Goal: Keep, hopefully increase your market share and the best time is in a recession. Best time to continually communicate to your customers inexpensively ( and newsletter, appreciation letters, sending a brochure, loyalty program updates) and a perfect time for you to get out of the office and talk to customers .McDonald’s has posted the best financial results in its history. The stock price has climbed handsomely in recent years; it reached its highest point ever in August: $67 a share. It closed last week at $60.07.Despite the slow down BCRhas consistentlymaintained their heavyTV advertising weight
51 Other cost cutting strategies Cut across the board instead of cutting critical staff:More benefits by cutting ‘across the board’ on expenses rather than shedding critical staff. You can reduce salaries, pay no vacation and even cut back on expenses such as travel and mobiles phones.Examples:Hewlett-Packard, cut 25,000 jobs following big acquisition, cut salaries by 2.5% to 20% and reduced contributions to employee 401(k) plans (i.e. pension plans). HP asked employees to take unpaid vacation days and extended a planned holiday shutdown to two weeks.Test equipment maker Agilent Technologies taking similar approach. Linked portion of employees’ base pay to financial results, so costs fall automatically when profit declines. In December, 2008 Agilent trimmed salaries an additional 10%, eliminated 500 full-time positions, freeze hiring, limit travel, cut temporary workers and mandate unpaid vacation.Ask employees where to cut! Executives at Commercial Vehicle Group in US asked four employees to devise plan to save additional $50,000 USD. The group identified $600,000 in potential savings, including office supplies and cell phones, which it presented to CEO. “They went after everything,” the CEO said.
52 Substitute to marketing cost cutting Creative marketing:Case 1) Romanian large national retailer.Low volume of customers visiting stores, approach was not to cut Marketing expenses but rather re-direct them and try something different: Localized marketing; that is, communicate more effectively to store’s catchment area or customers residing in vicinity (ex. flyers delivered through mail, Meshes or Poster Boards, Promoters, etc) .Case 2) French car Manufacturer with low market presence cannot afford NOT to advertize. They understand that you must keep advertising “ otherwise people will forget about us”.Online shoppers defy recession!In UK, Capgemini e-Retail Sales Index showed online spending increased 19% in January 2009,predicting monthly growth of 15% for online sales throughout 2009.“People go online for choice, price transparency and ability to research prices. These advantages are even more acute in environment where people are watching spending."Message. Romania online shopping is exploding. Even conventional products can now be acquired online in Romania. Inexpensive distribution channel and market timing could not be better!
53 McKinsey Global Survey Results Most respondents are still coping with the crisis by cutting costs, many are making more use of long-term tactics suggesting that see global economic turmoil as new normal.40 % of respondents expect upturn to begin by end of this year. Many executives are betting on the United States to lead that upturn..Companies sticking to tactics they identified last fall as helping them manage global economic turmoil.Higher proportion of companies taking longer-term actions such as restructuring, hiring talent, leaving markets altogether, indicating that more see turmoil as creating long-term structural changes.Only a fifth of respondents say their companies are reducing philanthropic spending as result of global economic turmoil.McKinsey Global Survey ResultsEconomic conditions snapshot: February 2009 Survey, Jan. 27, 2009, to Feb. 2, 2009,1,820 executives from around the world and represented full range of industries and functional specialties.Source: McKinsey Global Survey Results – Economic conditions snapshot: February 2009, February 2009
54 What has your company done to cut costs or reduce expenses? Workshop:What has your company done to cutcosts or reduce expenses?
55 Step 4: Perfect time to plan These difficult times forces us to become more creative. Take a step back and realize that there are a lot of areas thatneed improvement and the time could not be better:1. People planningConsider contingency plan for your key staff?Who are critical?Good time to test out future leaders ( new function, new department)Shift to other departments? How many would accept flex time, layoffs keeping them on the payroll long enough to qualify for retirement, medical or stock benefits.Critical part of core is continual development of employees. Yet remarkable how many businesses cut training and development in a downturn. The best never do.Just as most investment managers look like geniuses in a bull market, most employees can look like excellent performers in booming economy. Identify the impostors. Working hard at that task is important, because if you need to lay people off, as you well may, it's critical that you choose wisely.Subtler danger: When salaries, bonuses are reduced, you may be tempted to reduce them equally. Wrong message sent to best performers, who will feel they're being punished rather than rewarded for great work. Hay Group consulting survey of World's Most Admired Companies as ranked by Fortune, best companies take extra pains to reassure "most driven and focused employees," - ones most important to keep. Instead of spreading the pain, reward your best workers well, even in a recession.Make sure that pay arrangements don't encourage too much (or too little) risk. Deere incentives are based on economic profit, including capital costs, bonuses earned in any given year are paid out over four years; if performance falters, part of the bonuses can be canceled. The system encourages long-term thinking and seeing the recession as part of a larger cycle.
56 Step 4: Perfect time to plan 2. Product and service planningWhen this Recession is over, will your business be more competitive or less? Most successful companies never stop funding their most critical competencies - product innovation, customer service, or anything else. ‘We're protecting the innovation pipeline so we come out of this strong’Everyone would like to pay less, especially in recession; dangers of price chopping are greater than you may realize. McKinsey research finds that in a typical S&P company, a price cut of 5% would have to generate increased sales volume of 19% in order to pay for itself - and that almost never happens..Reduce inventories, accelerate payments from customers, and delay payments to suppliers, all while making sure to keep cash on hand most bankruptcies are caused by firms running out of cash, not because of a hit to earnings.Companies should also take a good hard look at inefficiencies, restructure if necessary, says SVP at Booz Allen Hamilton. “A recession gives you good excuse for doing what you need to do anyway,". End of the day, recession can turn out to be useful for firms well-positioned to withstand it.
57 One page marketing plan Complete Marketing plan requires weeks to prepare. In absence of time andurgency to get results consider preparing a ‘one page marketing plan”.Why?Drafting a plan implies setting a vision and direction.Weather competition and grim market news: “Stick to the plan”.You are the expert in your field.Forcing yourself to put on one page forces you to concentrate on priorities.Easier to remember when you wish to recall actions.Easier to communicate to staff and company.“Best part of having a plan...is that you can always change it”...“A company without a plan is like a ship without a rudder”
58 One page marketing plan - format Market review, regulatory framework, Competition.Market projections ‘05-‘10: ex. 960M EurosInternal environmental analysisVision and Mission:Vision: That ABC company will be recognised in Romania as a re-energised brand and renowned for its progressiveness, value and service.Mission: To create and fulfil demand for leading-edge data and voices services to all of Romania.Approach: Reinforce family valuesSeek new niches for products/promote new brandsLaunch products faster .Assumptions: Minimum company wide execution speed will take at least 2 yearsMobile penetration increase will erode ABC’s revenue/image and will create mass churn. Re-balancing will further increase churn.Objectives: Gain strong position in Business segments, 1) SME, 2) LA, 3) KAReduce churn. Launch New ADSL faster than competition.
59 One page marketing plan - format Market Segmentation: SME = Short term focus. Develop strategy for KA/LAProducts and Services: ADSL + ‘ADSL in a box’ for massive indirect channel take-up, VOIP.Tariffs: 5% premium over closest competitor for voice and data products.Distribution: Direct: Implement ABC Look and Feel (shops). Improve product offering, POSMIndirect: Encourage early adopters, reward well and communicate frequently Provide COOP and single out new players with major awareness campaigns.Marcomms plan: Brand values exercise. Implement next ‘Big idea’ for image.PR, sponsorship: 1 major event every 6 months. Optimise COR relationship, find significant sponsorship (football, Tennis); steal from competitorsMarketing budget: M EurosMarketing Organisation: Find Subject Matter Experts for Trade Mktg, Segments, ADSL and Program Management. Train, substitute, provide opportunities, push or relieve staff.Action Plans:1) Launch ADSL with huge campaign2) Improve top of mind awareness of ABC and ADSL Brand by 20%3) Plan bundling upon immediate billing system launch4) Plan for wireless access and voice (mobile partner)5) Improve all customer points of contact. Offer money Back guarantee6) Steal staff from competitors
60 Step 4: Perfect time to plan 3. Business planning - mergers and acquisitions.Recession is great time to buy assets cheap yet few companies do it. Merger activity peaks when markets are at their height, while most companies see a recession as a time to hoard resources until things improve. Companies are twice as likely to acquire businesses in their major segments during an upturn as they are during a downturn, the oppositeof what makes sense.If can't follow Warren Buffett's dictum to be greedy when others are fearful, but you're financially strong, this is your moment. McKesson says, "This is a great opportunity to pick up small companies and their talent," for which he is scouting avidly.BCR’s Business segment approach will consist of two major activities in 2009: Re-financing of working capital loans and mergers and acquisitionsTotalSoft, believes that the period ahead will be an opportune one for acquisitions on both local and region market; €4.5 million will be allocated for company takeovers, with funds to come from the company’s majority shareholder, the Global Finance investment fund.
61 Tools Supporting Business Planning* In a recession, making the right decisions becomes vital to success of company.Decisions should be based on facts - less on assumptions, changes that might occur in relevant markets (competition, consumer habits), opportunities or threats that might arise.Ability to adapt to changes, act fast becomes critical to success. Some of the best “tools” that can back-up your decision making process, especially in recession periods, are BUSINESS INTELLIGENCE and MARKET RESEARCH services.* Suggested by
62 Tools Supporting Business Planning* BUSINESS INTELLIGENCE and MARKET RESEARCH services.Suggested crisis / recession actionsBusiness Intelligence & Research SolutionsOutputs supporting decision making and business planningAssess crisis impact on market size and structureSyndicated / multiclient sector studiesThorough analysis of data, insights from key market participants to capture evolution of market sales, competitors’ shares, market trends, structural changes and scenario based forecasts.Cost cuts / Optimisation of supply chainSupport in identifying and assessing new suppliersIdentification and screening of alternative suppliers providing lower rates than the current suppliers, upon client’s specifications.Sales-orientation (to generate cash)Databases of potential new customers / Sales leads generation / Direct marketingBuilding up-to-date databases with potential customers and effective direct marketing programmesProfiling of key potential customers and sales lead generation.Updated status of major ongoing / announced projects that might generate sales opportunities.Price monitoringCollection of distributor / retail prices in the market for own and competitor productsReports on price levels, promotions in the market on regular basis (monthly, quarterly)Keep an eye on competitive moves in the marketCompetitive intelligence tracking & quick industry / company profilingSpot early, relevant moves of key competitorsLearn from competitors and get prepared to counteract adequately* Suggested by
63 Tools Supporting Business Planning* Suggested crisis / recession actionsBusiness Intelligence & Research SolutionsOutputs supporting decision making and business planningIdentify changes in consumer behaviorAd-hoc/multiclient usage and attitudes studies (U&A)Identify new consumption and purchasing habits of individuals, corporate customersDetermine new consumption motivations that occur as consumers/ corporate customers confront with crisis constraintsMonitor changes that might occur in brand perceptionAssess customer satisfaction, investigate lapsed customers to quickly spot problems and keep current customersIdentify switching patterns that might occur as brand loyalty decreasesUpdate positioning strategiesAd-hoc/multiclient consumer segmentation and positioning studiesIdentify newly formed market segments and update positioning strategy for your products/services if needed.New product developmentAd-hoc concept testing and product design studiesNew product variations could be created to better meet needs of consumers in recession times.Design new advertising strategiesAd-hoc advertising researchIn recession times, consumers could react to different stimulus than usual therefore, different ways of promotion, advertising messages might be needed.Improve performance of own personnel and retail partnersRepetitive mystery shopping and auditsAssess performance of sales and customer service personnelIdentify communication problems and generate solutions to new problems (tensions tend to rise during hard times)Evaluate retail & distribution partners performance (allocated shelf space, stock management, merchandising etc.)* Suggested by
64 Segment ManagementIdentifies and develops marketing programs, segment targeted campaigns, offers, inputs into products/pricing opportunitiesIdentifies co-marketing programs, acquisition opportunities, up-sell opportunities, retention programsPrepares and manages marketing plan tailored to each segment to drive acquisition, up-sales/increase customer value, market penetration, minimizing churn, and building customer retention, and product mapping which translates into a comprehensive 12-month Roadmap to drive revenues and retention.
66 Segment Management in Practice Cross-Functional Teams for each Segment Focus of Cross-Functional Teams:Meet monthlyReview cross-functional ROADMAPFlag and/or initiate key market actionsAdjust roadmap based on market and/or internal needsDrive the businessAlign key activitiesPERMANETCROSS-FUNCTIONALTEAMS
67 Ideas and trends for your customers Fitness club: A free two-week membership.Customers must attend six supervised classes during the two weeks.They pay $25 upfront, and upon completion of the six sessions, they get the money back."My belief that club and industry is recession-proof industry because the more stress people have, the more they need a physical outlet for that stress,"2) Zero revenue: Club will freeze accounts or let members downgrade their memberships if they stumble into hard times."It shows our clients we understand the recession is here and it's going to stay for a while”“I'd rather have a member who's paying $10 a month that will continue to come to the club. In six months, maybe they'll have a job and will resume their membership. Or maybe they'll decide they don't want to participate.Either way, we've kept that client for six more months”.Creative home buying:Developers have cut apartment prices,offered free furniture, parking spaces,offered to pay notary fees or VAT,Pay rent or allow buyers to rent the apartments until they are able to secure loans to pay for themE-commerce market will continue to increase because in Romania in 2009 it is define as a very young market and during recession periods people are looking to cut time and budget in order to buy products and services. So whoever wants to buy online business, now it’s the time!
68 Ideas and trends for your customers New ways of leasing cars: Business Review, January 19Operational leasing is regarded as a solution: ensures reduced and predictable costs for the entire duration of the leasing contract and provides solutions for the moment of sale.In Romania operational leasing accounts less than 2% of the new car market Vs. CE Europe it makes up 30% and in the West around 60-70%.Why: Romanians are used to buying cars and not renting them, even if it is more efficient to rent them. Sixt closed last year 200 short-term rental contracts, out of total car pool of 5000 units and for this year estimate about 7000 cars. They estimate that they will sell 500 used cars this year because during this period of crisis people will buy second-hand cars instead of new cars.Inexpensive Marketing: Mobile Marketing is the new trend that Romanian specialized companies are trying to follow this year. The market players estimates that mobile market will experience a real boom in The probability for this market to reach EUR 4 million is very high due to important players support and the quantification which can be done in real time.All Night Sales (1958)In an effort to overcome declining auto sales, one of the hardest hit sectors of the slump, the Beyer DeSoto dealership of St. Louis, Missouri , USA put its salesmen on duty for 64 hours straight, as part of a sell-a-thon that raised sales 73%.
69 Ideas and trends for your customers Online vouchers:Number of online searches for retail discount vouchers jumped massive 143 per cent, final quarter 2008, while visits to banking websites also increased as customers sought best deals to interest rate cuts. In recession, more and more retailers turned to online discount vouchers to woo reluctant shoppers.Director of research at Hitwise: "British consumers are turning to the internet to save money and get best deals as a result of credit crisis.. Internet is being used to combat effects of recession and find latest banking deals, money off coupons and financial advice..Hyundai:Last fall Hyundai began testing the idea of a return policy rather than simply piling more discounts onto its already low-price vehicles. The guarantee covers the difference between the value of the car and the amount the buyer owes, or negative equity, up to a maximum of $7,500.Sales of the Hyundai Sonata, a full-size sedan that costs less than $20,000, surged 85 percent in January and one reason for jump is Hyundai’s new marketing strategy of promising to let buyers return their vehicles, at no cost in most cases and with no penalty to their credit rating, if they lose their job or income within a year.To their credit, they struck at the core of what’s bothering people.
70 Step 5: Over communicate Preliminary thoughts Observe how you behave these days Difficult times require you to sharpen your own skills. Take classes, read books and network with others in your industry, learn from them. Get out of the office and talk to people.Get involved in Business association. Look for joint venture opportunities. Determine priorities. Where should you be spending your time? Make your company bigger, better and stronger? Leave the worrying to your competitors and instead seek opportunities, stay positive. The right energy and focus into your business-despite the economy-the results can extraordinary.Most executives hunker down in uncertain times, keeping quiet until they believe they have some answers. That's the opposite of what's needed. In a recession all company's constituencies are nervous: Employees are worried they'll be fired, suppliers that they won't be paid, customers that quality will decline or prices rise, investors that the stock will tank, communities that operations will close down. Silence just makes them worry more.Good managers respond by communicating even more than usual. They find that they needn't have all the answers, but they do need to say what they're thinking and be honest about conditions.Julia Stewart, of IHOP restaurant chains, says, "It's important to assure your employees by making clear your vision, making sure they know that you care, and making sure that you're direct and honest. They just want the truth."John Hammergren, CEO pharmaceutical distributor McKesson, has been holding employee town halls, where his goal is "to give confidence that we're in a great industry, McKesson is in leadership position." Every good company has upbeat facts, even in a recession, and need to be repeated.
71 Step 5: Over communicate. StaffPrepare a communications plan for staff. Including direct approach to what’s going on, your concerns as Leader and possible outcomes - good and bad. If this goes well, this may happen… If things get worse, yes some of us may lose our jobs.2) Be honest and sincere. People feel you hiding things and will respect you if you communicate without hesitation what contingency plans are available. By being direct, employees will stop the rumor mill . By the way, You need to communicate! Not your HR Director. Staff want to hear it from you.3) Remain focused on the task at hand. Still need to sell, serve or create something. Employees need to be reminded that job has to get done. Remind them their individual contributions matter to organization.4) Be appreciative. Thank You goes a long way.5) Be open to feedback. Encourage feedback. Listen but remembering the most fundamental rule of encouraging feedback: You have 2 ears and one mouth…use them accordingly. Listen, acknowledge and don’t defend the idea/feedback since this is counterproductive.6) Be consistent with your public messages. If you cut back on staff and approached by media or outside stakeholders, remember to keep in mind that any initiative will consider the impact on employees. This way you are consistent internally and externally.
72 Step 5: Over communicate. Customers1) Communications plan to the public. What are the messages will be communicated by the team. Involve Marketing/PR team/agency involved in brainstorming, come up with key messages. Once messages are established, formalize them, convey to staff what external messages to give to customers when they call.Same messages from the CEO and Call center Rep will avoid damage control when it comes to dealing with customers, the public or media.Get market intelligence, validate what customers are saying lately about you and address it with a coherent communications plan.2) Reassure your clients that we all feeling this recession but you want to remain close to customers, encourage their feedback. Encouraging them to speak to their sales representatives, re-looking at business practices to help them is a good idea and a CEO blog are only a few examples. Sending a thank you note for their business will go a long way.3) Honesty goes a long way. In these difficult times, customers will remember what you communicate to them and if your firm was open and honest in your communications.4) Use the Leader of the organization for all communications. Customers want to hear it from the leader , want to be reminded of your strength on the market and want reassurance that your company will be around in 6 months.
73 Step 5: Over communicate. Customers – maintaining the linkMicrosoft Dynamics CRM:Assuming database of 10,000 clients, integrate the Excel files including customer data or paper form.Interacts with all Office software.CRM, it is completely scalable.Cost: one server license + 2 user licenses plus 30 man days at integration = k Euros.Implementing quick CRM solution to communicate promotions, loyalty program reminder or ‘Thank You” note will ensure that customers keep you top of mind.Proactive and consistent outbound communications to advertize and low price CRM, this will give you results now when times are tough and when things start to improve.
74 Thank you letters Benefits of “Thank you” letters: Develop better, stronger interpersonal relationships with your customers.Reduce, lower any buyer's remorse any customer or client feels after their purchase.Gain free word-of-mouth advertising when customers tell everybody about unexpected "thank you" letter from your company, how good they feel about doing business with us.Have an opportunity to resell more (or other) services or products. Promote this by including a special price or discount offer in the "thank you" letter.Enhance your company ‘s image as consumer-oriented business.
75 Thank you letters - Background Loyalty Facts68% of consumers change their place of business for little or no reason.Costs between five and seven times more to find new customer than retain one.A 5% reduction in lost customers can increase profits by up to 75%.Only 3% of businesses have a 'lost customer' reactivation program.Existing customers not as price sensitive as new ones, require less sales time, administration and advertising.A first-time customer has a 30% chance of becoming a long-term profitable customer. If they buy three times relatively quickly, their chance of becoming long-term more than doubles to 67%.Contact TipsBirthdays and anniversaries are special time for everyone. These occasions are great opportunities to build customer relationships by writing to them, offering an exclusive offer that day.Send a 'thank you' letter or incentive to customers who refer new customers to your company.When a customer purchases a service, there is often certain period of time till they purchase again. Contact them then, when warranties are about to expire: offer a service agreement.
76 Thank you letters - summary WHATDifferent „Thank you” letter types (New Subscriber Thank You Letter , How Did I/We Do? Letter, Happy Anniversary Letter , At Random, Customer Appreciation Letter , etc.)WHOGenerally, “thank you” letters should be addressed to all your customers.Depending on “Thank you” letters’ different purposes they should be addressed to different targets (e.g. new customers, loyal customers, potential churners, etc)WHENAnytime, but on specific occasions (after the sale is closed; each year of subscription with your company)WHYMost inexpensive, effective way to thank customers for their continued business, remind them of your services. Simple gesture is a way to ensure that customers feel appreciated and will return to give us future business.WHEREDirect Mailing – either together with your invoice, or sent separately.
77 Step 5: Over communicate. Investors1) Prepare a communications plan for the investors. Key messages should be simple, consistent and clear.2) Maintain a dialogue with them.Ownership structure will dictate who and when you should be communicating to, Don’t’ wait till the next board meeting for delivering key messagesBe proactive, call them up and you may get some good advice on some reading they have made or peers they have in other businesses.That is after all one of their inherent duties as an owner.
78 Next steps…1) Re-read these slides and share them with your team and management2) Prepare a one page Marketing plan3) Prioritize on what can be done quickly4) Communicate:Company's current situation with staff,Help required by teamFirst deliverables stemming out of the planMessages to your customers and shareholders5) Be part of the solution by inspiring confidence6) Get ready for the recovery
79 End in sight - Significant events, milestones Economy could begin to recover in April, claims Gordon BrownOn April 2, the G20 world leaders, including Barack Obama, will come to Britain to work towards a "global deal and grand bargain,"Gordon Brown. The world could then "move towards recovery in the next few months" if agreement was reached, because the trust and confidence in the world economy need to be rebuild.Gordon Brown, heavily criticized for introducing a £12 billion VAT believes fiscal stimulus measures are best way of sparking economic recovery because priority is people facing mortgages problems, problems with jobs and problems with small business finance.Pressing hard to persuade other countries to adopt measures that were adopted in Britain. Global problem can be solved only through global action and international co-ordination.March 13, First time in months that Dow Jones and Nasdaq have 3 days of consecutive gains!
80 Outlook Procter&Gamble establishes a second factory in Romania Source: Standard.ro, January 03, 2009Procter&Gamble establishes a second factory in RomaniaSource: Standard.ro, January 03, 2009OutlookWhole Foods Market CEO John Mackey says:"We have to manage the business differently." Economic growth used to be a tail wind that the company built into its business plans.“One of the leadership challenges I have is that that assumption is no longer true." The new era "requires a different mindset - we have to be more frugal, to think about every expense, every capital investment - because we won't be bailed out by growth." .It's hard to be upbeat in a recession, but it truly is an opportunity. Marathoners and Tour de France racers will tell you that a race's hardest parts, the uphill stages, are where the lead changes hands.That's where we are.When this recession ends, when the road levels off and the world seems full of promises your position in competitive pack will depend on how skillfully you manage right now.
81 10 Reasons to Love a Recession Family DinnersShorter Lines at the gas PumpLess Junk MailMore DiscountsFree FitnessBargain SUVsBusiness Startup OpportunitiesGrowth in GardeningMusical InspirationNew Perspectives
82 To have courage for whatever comes in life - everything lies in that. Dig the well before you are thirsty.Chinese proverbDig the well before you are thirsty.Chinese proverbDig the well before you are thirsty.Chinese proverbDig the well before you are thirsty.Chinese proverbTo have courage for whatever comes in life -everything lies in that.St. Teresa of Avila ( ) Reformer
83 This mess started by a lack of confidence and will end with renewed confidence Paul Renaud Business Coach
84 How we can help Renaud Investments Renaud Investments is Romania’s leading Marketing Coach providing companies help on how to optimize the 4 P’s - Product, Price, Place and Promotion of your organization.We coach the CEO and management teams in areas such as:Restructuring commercial teamsBusiness development tools and activities to complement your database of clientsInterim management in Marketing communications, Market research, Segmentation, Product development, Sales and Customer Care.Marketing plan development and rolloutStrategic plan elaboration, rollout and management team alignmentOur clients:Renaud Investments have Coached and provided effective solutions to both Fortune 500 and Small and Medium size (SME) companies.
85 Suggested readingComprehensive program based on developing an awareness of how perceptions and assumptions hinder success---in business as well as personal relationships.Broaden your way of thinking and lead to greater opportunities and effective problem solving.1) Be Pro-Active2) Begin with an End in Mind: Start with a clear destination to understand where you are now, where you're going and what you value most.3) Put First Things First: Manage yourself. Organize and execute around priorities.4) Think Win/Win: See life as a cooperative, not a comprehensive arena where success is not achieved at expense or exclusion of success of others.5) Seek First to Understand: Understand then be understood to build the skills of empathetic listening that inspires openness and trust.6)Synergize: Apply principles of cooperative creativity and value differences.7) Renewal: Sharpen the saw. Preserving and enhancing your greatest asset, yourself, by renewing the physical, spiritual, mental and social/emotional dimensions of your nature.