Agricultural businesses will survive the recession, says a marketing professor from Queen’s School of Business.
Ken Wong told the Agriculture Council of Saskatchewan annual meeting in Regina June 19 that during tough times, companies can increase market share, reduce costs without sacrificing quality and enhance value at little or no cost.
Proctor and Gamble, for example, increases its market share every time there is a recession, he said.
This dates back to the Depression of the 1930s when the company did not reduce its advertising budgets. While its competitors were cutting to save money, Proctor and Gamble continued to spend and reassure customers it was still there.
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Company-sponsored radio soap operas were heard in millions of homes, and consumers still need to buy the basics during a recession.
That developed a brand loyalty that still exists today, Wong said.
A McGraw Hill study done during the recession of the 1980s found that companies that continued to spend money on advertising saw revenue growth of 275 percent.
Those that cut back lost about 20 percent.
Wong said other studies have found the same results.
Companies can cut costs and maintain quality by following lean manufacturing practices such as the Toyota production principle, he said.
Those practices are already in place at several prairie manufacturers such as Brandt, and the Saskatchewan and federal governments recently announced they would fund specialists to help more companies wanting to train employees.
Wong noted that a car at General Motors cost $1,500 more than the Toyota version. Quality can be obtained at a lower price, he said.
He also encouraged companies to offer better value for the same price.
“What if you could guarantee on-time delivery?” he said. “Or more frequent delivery? Or research to back up your product? Or service?”
Using differentiation to build market share works better than lowering prices because any competitor can cut prices to match, Wong said. Not everyone can offer 24/7 service.
He added the recession is time to strengthen relationships with existing clients and cultivate new markets.
“You don’t have to reintroduce yourself to your markets (when the recession is over),” he said. “You don’t have to apologize for the lousy service you gave them during the depression.”
