Soft markets are opportunities to grab future market share. Let me illustrate.
No matter how much business there is, there’s 100% of it. That is a statistical certainty. You have a certain percentage of that business: that’s called your market share and it remains fairly constant over time.
When the market is soft you make less money, when the market is strong you make more money because you have a certain percentage (your market share) of the 100% of the business that’s out there.
Soft markets are a time of great opportunity. Why? Because when the market is soft, people have a natural tendency to pull back. They invest less money in marketing. In doing this, these businesses reduce their exposure, thereby exposing their market share to theft by competing business.
If you simply maintain your exposure during a soft market, it’s very possible that you may pick up some market share during this time. That is, unless there’s someone else out there being more aggressive in chasing that exposed market share.
Now, let’s say that you decide to increase your exposure during a soft market. Because of your aggressiveness, you pick up some of that unattended market share. You now have a larger portion of the 100% of the business that’s out there, even though your real income may not increase….yet.
Now here’s the good part. When the market rebounds, that 100% of business gets larger, dollar-wise, and so does your business. It’s like there’s a bigger pie coming out of the oven. You have a larger share of the market, so when the market grows, so does your slice of the pie.
The key, however, is to get more aggressive when things get down. When others start pulling back, that’s your cue to press forward. Increase your market share now, to improve your profits later.
This was a guest post by Jay Ehret. Jay is a small business marketing specialist and operates The Marketing Spot consulting firm in Waco, Texas. He authors two blogs on small business marketing, The Marketing Spot & The Idea Spot. He consults and coaches local businesses in Central Texas and also conducts his DIY Marketing for Small Businesses workshop throughout the state.
This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
Jay, Great post and explanation of a strategy that is far too often not taken advantage of.
When markets “turn soft” or even turgid colors, the pressure from the passive, conservative “Grey Ones” start calling for cost cutting and retreat, the entrepreneur needs every bit of help they can, to drive aggressively forward during these trying times.
It’s not just that, but if everyone is doing less marketing you’re likely to be able to get more bang for your buck. You’re in a good position to negotiate for lower advertising rates etc.
Particularly, if you are the new entrant, it could be a great opportunity. If you are the incumbent, you may be bleeding cash and may not be able to capitalize on the situation.
One thing we need to be careful is the overall industry trend. A certain industry never recovers after the dip.
If you are the incumbent bleeding cash then I’d argue your fist action should be to cut costs not investments (I’d argue that sales and marketing are investments).
Cost cutting should be done by improving operational efficiency, and looking at refinancing the business as necessary.