Home
arrow_forward_ios
Articles
arrow_forward_ios
Conversion Rate Optimization
arrow_forward_ios
2023 Playbook: Lessons From the Recession Part 1 of 3

Schedule you FREE
Website Strategy Session.

If your business generates over $1M online, our experts will discuss your conversion goals and suggest strategies to double your sales.

Schedule your FREE session

Case Study

+15% Conversion Rate increase in 30 days.

See our Case Studies

Case Study

+195% traffic increase and +417% visibility

Read More Testimonials

July 14th, 2021 by

Ben Dandurand

2023 Playbook: Lessons From the Recession Part 1 of 3

The Great Recession and the COVID-19 pandemic have taught us valuable lessons that are important for companies to take to heart. Recessions aren’t unique and are all typically characterized by capital restraints, and tough labor markets.

While I’m not a master of macroeconomics like our friends at McKinsey, I do understand that my skill sets are aligned with their findings in what successful companies did to thrive in past recessions.

Part 1 and Part 2 will deal with findings from our research, while Part 3 is dedicated to actionable insights that companies can take to help navigate and thrive in uncertain economic times.

Part 1

What has worked in tough times?

Improving profit margin beats improving revenue. Analysis of the past recession shows that companies that focused on improving their profit margins grew faster than their peers who focused on growth.

What McKinsey calls “optionality in the balance sheet” can be simplified to capital liquidity. Essentially, it stems from the first finding. A combination of increasing your margins, building your working capital, and decreasing your debt allows companies to be more flexible and respond faster to opportunities.

Being able to focus on growth and profit margins has an exponential effect. Increasing our margins and working capital gives us the flexibility to increase growth by exercising our options faster than the competition with our improved liquidity. 

Companies that improved their margins AND were able to grow revenues experienced a “1+1=3” effect. This isn’t terribly hard to wrap our heads around, as this strategy tends to be successful no matter the economic climate. However, in tough times, it boosted companies ahead of their peers even more.

Part 1 of a three-part series on how to navigate economic uncertainty using lessons learned and data from the pandemic and most recent recession.

This McKinsey graph illustrates the point extremely well. Companies that improved margins outperformed companies that just focused on growth. But, companies that were able to capture market share while improving efficiency got an even greater boost to performance.

Where do we go from here?

It would be nice if every company could afford to hire McKinsey, Bain, or BCG to come in and help us navigate the storm, but we don’t have time to kid ourselves. However, we can use their free resources and hire the support we can afford to set ourselves up for success and capitalize on opportunities before our competitors.

We have the data, but the big question is what do we do next? All three takeaways of increasing margins, capital liquidity, and exercising our liquidity to capitalize on growth opportunities can be accomplished in a variety of ways. How you go about it will depend on how big you can build your war chest and the nature of your industry.

Improving margins for eCommerce retailers can involve more efficient inventory management and converting more traffic. Manufacturers can improve their payment terms, and tech companies can investigate ways to license and monetize intellectual property. 

The importance and main takeaway of improving margins in tough economic times is strengthening your balance sheet to withstand strong economic headwinds, and building capital to allow for decisive action when opportunities arise. The studies showed that companies who acted before their peers experienced higher returns than those who waited or weren’t able to move as fast.

Resources

Forbes: What Challenges Will CMOs Deal With Most Often In 2022?

WSJ: Edgy Campaigns Are Out, TikTok Won’t Stop and Other 2023 Predictions for Marketers

McKinsey: Planning for 2023: How US-based businesses can succeed when capital and talent are constrained

WSJ: Marketers Must Be Flexible, Without Losing Identity, in Uncertain Times

WSJ: How CMOs Are Marketing Through a Turbulent Economy

Next up…

Stay tuned for Part 2 where we’ll discuss specific recommendations for staying on the ball with your audience and making sure you're providing measurable results.

Previous Article

Heading

Read Now

Next Article

Heading

Read Now