COVID-19 has presented unique (disatrous) challenges for companies of all sizes. From not being able to fully operate to losing customers, it has not been a happy time for anyone (except maybe Amazon). We’re not going to debate closures or mask requirements or government policy here. Instead, let’s focus on a strategic concept that may help you thinking about business going forward.
Only the visible survive
The tendency when things get tough for your business, whether it’s from recession or other externalities, is to hunker down and get defensive. Sales and revenues are down so naturally we starting looking for places to cut the budget. Unfortunately, many businesses let the tail wag the dog and head straight for sales and marketing expenditures. After all, it’s easy to chop that next ad placement, lay off a sales rep or maybe ditch the marketing coordinator. After all, those budget items are about the future, not the present.
The problem with shrinking markets or bad economies is that you’re in a fight for your life. We’ve seen numerous examples of companies going defensive only to lose in the long run to those that stay on offense. A great case study for this was the go-go racquetball industry of the 70s and 80s.
When racquetball first started taking off as a sport, there were two companies — Leach and Ektelon. (Disclosure, I worked for Ektelon.) As the market grew, other racquet companies took notice and started making racquets including Head, Wilson, Kennex, Olympian and Spalding to name a few. For awhile it seemed like there was room for everyone as the market and popularity of the sport kept growing.
But, like all hot trends, things eventually slowed down and the sport started shrinking. Fewer players, fewer tournaments, few court facilities. In spite of this, Ektelon kept its marketing, sales and promotional efforts going. Meanwhile the big companies like Head, Wilson and Spalding started pulling back. Even Leach, the number one brand in racquetball, reined in everything.
Four years later, Ektelon had 75% of the market share for racquets, 50% of the market share for balls and 90% share of clothing and accessories. Meanwhile Leach was dead and everyone else was just dabbling. Even with a reduced market, Ektelon was profitable. The point is that when times are hard, the survivors fight harder. They keep the pressure on their competitors. They find new ways to sell. They adapt. Change. And above all survive.
Of course there’s a footnote to all this. The sport of racquetball eventually collapsed as court facilities were converted to more profitable space uses. While still a leading brand in the sport, the market is probably 10% of what it once was. Upstart racquet maker, E-Force, founded by three former Ektelon execs, now holds significant share but the sport is clearly a niche activity in the general sporting goods market.