Planting Seed in a Storm (Commentary by Jim Karrh)

With the equity markets hopping around (but mostly going downhill) and credit tighter than bark on a tree, how is it that I can be writing to you while traveling to help a client plan the expensive market entry of a new and high-priced consumer product?

I have faith that financial conditions will stabilize and consumers will get their groove back in 2009-10.

If you have similar optimism and are proven correct, then you can be a big marketing and sales winner.

As reported in this space a few months ago (“Recession Resistance,” June 23, 2008), those companies that hold steady or even increase their marketing efforts during a recession are almost always rewarded with valuable incremental market share.

But what about a truly new — and thus inherently risky — product or service?

Is a storm really the right time to plant seeds?

Don’t we need a lot more than optimism as a guide for marketing investments?

This client and its product have some particular characteristics that offer an enhanced likelihood of success, even while launching during a downer period.

There are some lessons here for any Arkansas business leaders who want to position their companies for something a little better than pure survival mode.

Here are the key characteristics:

• This company has adequate capital and committed investors.

My sense is that there is still some equity out there for good ideas and solid management teams — from steely-eyed value investors who realize this is the time to get in.

This company appears to have the right balance: enough capital to fund operations and growth, but not so much that financial discipline mustn’t be followed.

The investors are also committed to the long-term health of the brand and business.

• This client has already been creating buzz, piquing interest from the trade and building potential long-term relationships. Using public relations and channel relationships, the company’s leadership has been previewing the introduction of the product and building a little excitement prior to launch.

The pace of those activities will be increasing, and also shifting to consumer buzz, as we get closer to actual launch and rollout dates.

These activities are very cost-effective and often live online. Another consideration: tough times are actually good times for securing good deals from suppliers and gaining the interest of retailers and/or distributors that badly need new opportunities.

• The business has a marketable and defensible product advantage. There is obviously no rising tide to help an undifferentiated “me-too” product survive despite itself.

Tough times make differentiation, segmentation and precision even more important.

• The business is largely scalable.

Although this business required some substantial capital spending up front (mostly production capability, but also marketing spending), the pace of growth and working capital needs are to a large degree under management control.

The company will launch in one market, then build distribution and production in accord with sales success, personnel needs and marketing activities.

So what about you?

Assuming you aren’t launching a high-end consumer brand yourself at this moment, is there a lesson to learn?

I believe there is. And here in Arkansas there are already a number of companies that have announced rebranding initiatives, are faced with branding acquired properties or are introducing new products.

As you are planning 2009 in the midst of this current storm, you might try to find room for that great idea or pilot project with some of the same characteristics mentioned above.

Look in particular for initiatives that are scalable, have short payback periods, present the opportunity for long-term growth and could help with channel or strategic relationships.

(Jim Karrh, Ph.D. is senior vice president of Advantage Communications, Inc.; e-mail him at [email protected].)