During the past one month, Entrepreneurs from the region around Chandigarh, have inquired about what could be an appropriate response for their firm to the current contraction in demand. Well, classically, during a slowdown most companies tend to prune their market spends. This could prove to be a wise tactic for a b2b firm sometimes, but most certainly the FMCG sector could better stay away from even toying with such an imprudent step. Organizations in the durable space have no clear cut alternatives and would have to take a position depending upon their place in the market. But the SME sector has to be most careful in designing a suitable action plan.
Exports from India have also registered a downward trend. Inventories are piling up in the durable and auto sector. A major Indian auto company has been forced to declare production interruption at their plants. So what could one do in such a scenario?
Let me share with you the strategy for the next quarter put in action with two of my clients in the SME domain. They have advised their teams to use the opportunity to focus away from new sales and invest more time in generating customer goodwill by settling outstanding issues. This could be combined with paying more attention to settling outstanding payments cases on priority. This would lead to satisfactory cash flows and positive bonding with customers by settling the contentious issues.
I certainly do not recommend offloading the inventory into the market at the distribution points. Although some companies can surely exert their marketing might to influence the resellers to carry high inventories. You could do it by discounting prices or offering attractive margins to the trade etc. But this certainly affect your image once the markets come out of slowdown phase that may last for 9-12 months as reflected in the major indices.
Mass media advertising does not help in such a scenario because the consumer is not an upbeat mood. It would be proper if the companies shift their market spend to the point of purchase, in store events and other below the line media. I strongly recommend the use of events and in theatre advertisements in the present scenario as it is necessary to motivate a buyer before she can open her purse strings. SMEs have to seek customized solutions depending upon their unique position in the market
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