Is Your Firm Cost-Cutting To Death?

Last Updated Apr 20, 2009 2:19 PM EDT

In a bad economy, it's stupid to cut costs, especially in sales and marketing. That's the conclusion of a number of recently-published studies of how companies behave in response to a recession. Turns out that the firms that do best, during bad times and after, are the ones that pump money into the right places, rather than the ones that slash across the board.


The first study, by the sales scientists at CSO Insights, revealed that (as you might expect) the global recession is making it harder for sales teams to hit their quotas.The report, which was based on a survey of over 1,800 companies worldwide, makes the case that investing in improved sales effectiveness needs to be a top priority in 2009:
"We do not believe that success in 2009 will be achieved by making more sales calls. The real objective is going to be how to make great calls: motivating stakeholders to meet with you; creating a sense of urgency that moves evaluating your solutions to the top of their priority list; differentiating yourself from the competition; selling value (so you can avoid discounting); creating a compelling business case to get the project approved now...2009 needs to be about investing your way to sales effectiveness."
The second study (actually a series of studies), referenced in The New Yorker, explained that companies that invest more during a recession typically do better than those that cut costs:
Firms that kept ad spending stable or increased it during the recession of 1921-22 saw their sales hold up significantly better than those which didn't. A study of advertising during the 1981-82 recession found that sales at firms that increased advertising or held steady grew precipitously in the next three years, compared with only slight increases at firms that had slashed their budgets. And a McKinsey study of the 1990-91 recession found that companies that remained market leaders or became serious challengers during the downturn had increased their acquisition, R. & D., and ad budgets, while companies at the bottom of the pile had reduced them.
With all that in mind in mind, I have a question for you:

  • Geoffrey James

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