Tips for surviving the market meltdown

Christopher Lochhead, the retired chief marketing officer at Scient and Mercury, offers a follow-up from his post in August on how companies can thrive in a prolonged economic downturn.

Reading The Wall Street Journal and watching CNBC lately can drive a person (namely me) to drink. Which is fun, but beyond answering the question, "Which scotch will I drink?" the seminal question is "How do we thrive in a downturn?"

Downturns are the best time to take market share. Most companies overreact. They get too conservative. They also forget that they are not the victims of the market.

Customers buy (or they don't) based on the way we do business with them, not the other way around. So now is the time to get aggressive, compel customers to buy and hit competitors when they are weak.

I am reminded of the sage words of Steven Tyler, the lead singer of Aerosmith, who said, "Love in an elevator, livin' it up when I'm going down." Well, it's time to live it up.

Invest in new technology
Time has proven that companies that leapfrog with technology win. It is surprising how slowly Web 2.0 and other important new technologies are being adopted in the enterprise. Much of the innovation seems to be coming in the form of new consumer services and technologies. Now is the time for the enterprise to move from Web 1.0 to 2.0. There is a whole new range of new 2.0 stuff to look at and implement. Here is a list of a few of my favorites:

• Cloud services
• Enterprise social software (Social networks, wikis, blogs, prediction markets)
• New software as a service (SaaS) apps
• The emerging category of PaaS (platform-as-a-service)
• Blade servers and storage
• New virtualization & provisioning technologies
• New mobile apps (Anyone notice the iPhone & BlackBerry growth?)

Business technology budgets at many companies will do down in this downturn. The question is, can companies cut and grow at the same time. They need to find and cut waste to fund new Web 2.0 projects. Optimization is the key. Following are a few ideas:

• Whack 10 percent of all development projects (At least that many are no longer needed.)
• Cut production apps by 10 percent (At least that many are under-used.)
• Increase data center and application consolidation efforts
• Look at more areas to outsource

Launch a bold marketing campaign

In bad times, customers look for solid companies. Brands that are visible win. The worse thing you can do in a downturn is cut the marketing and sales budget by too much. While some belt tightening across the enterprise is prudent, this is one cost center where too much cutting can kill you. One area you can cut in marketing is the reach and frequency advertising. It is more powerful and cost effective to go big, in a very targeted way for shorter lightening strikes, than to spread an advertising budget evenly over 12 months. Don't forget, if you make your brand disappear for a while, it may disappear forever.

The seminal move is to figure out what the key differentiator is for your company. Then launch a campaign to drive home that differentiation while building the category for your offerings. Consider traditional approaches (advertising, PR, direct, events, etc.), but emphasize nontraditional, highly-viral ideas. Here are some great recent examples:

• Trek Bikes challenges people to ride their bikes more with their new Web site.
• Kinesio, the new athletic tape, gave their product away to athletes from 58 countries for use at the Olympic Games. One look at the wild, black spidery-like tattoo-tape on Kerri Walsh's body as she swatted volleyballs down opponents throats and a lot of people started buying the stuff.
• This summer legendary billionaire corporate raider and oil man T. Boone Pickens launched a bold campaign to create a breakthrough in market demand for alternate sources of energy. His ads, Web site and PR (appearances on CNN, Fox News, the New York Times and many, many more) make his case for reducing American use of foreign oil and embracing wind, solar, and natural gas, all while creating demand for his new companies.

Buy companies

Downturns are the best time to buy companies, and here are four reasons:

• Valuations and market caps are way down. Any company you want to buy is a lot cheaper today then it was a year ago.
• Doing acquisitions now allows you to expand your market footprint fast, with new offerings, customers, geographies, or markets.
• The dreaded word "synergy," which is a euphemism for layoffs and cost cutting. It may be harsh to say, but acquisitions are a great excuse to take unneeded people and costs out of both the company you are buying and your own company.
• It sends a strong message to your customers, people, competitors, and shareholders that you are a bad-ass company that is going for it, when most of your competition is hiding under their desks. This will often drive them to buy more of your product and your stock.

Making smart cuts is part of winning in downturns. But no one ever cost-cut their way to greatness. Now is the time to go on the attack. It just takes courage, cash, and conviction.

Click here for ongoing coverage from CNET News, 'Tough times for tech'

After twenty years in business and being the marketing chief at three public companies, Christopher Lochhead retired at 38. Now, he serves on a few boards and is a part-time strategy advisor. Every year he gives a handful of speeches, and from time to time writes something. Check out www.lochhead.com.