As a millennial, Connor brings a new perspective to the world of economics, delivering ITR’s industry-leading accuracy to current C-suite executives while forging connections with the next generation of business leaders.
The business cycle peak has occurred for the US economy. Business-to-business and business-to-consumer activities alike are decelerating, in line with ITR’s longstanding outlook for slower growth to grip the US economy in 2019. We expect things will get even more sluggish before they get better. During the last couple years, most businesses were riding the business cycle to its peak, and the task was keeping pace. For 2019 and into next year, firms cannot simply ride the business cycle; they will have to attack it if they want to meet and exceed lofty growth targets in line with prior years.
For many companies, the nascent slowdown in their incoming orders through the first half of 2019 is coming as a surprise, particularly when contrasted with the breakneck pace of growth in 2017 and 2018. Many business leaders are fearful that their companies will follow the macroeconomy on its slowing trajectory during the next few quarters. As activity slows, many organizations will look to sales to move the needle, simply aiming to "sell more." Easier said than done when the global and US economies are on the back side of the business cycle.
The most obvious way to use economic data for your sales team is to identify your growing markets and divert your sales and advertising resources toward them (and away from the deteriorating sectors). But that’s low-hanging fruit.
There are a few more nuanced ways you can leverage economic data and the business cycle to maximize your sales team’s performance, even when the economic winds aren’t filling your sails.
This might seem painfully simple, but internal communication is critical as the economy and your core markets transition to different phases of the business cycle. In our consulting programs, we typically converse with C-suite executives and other top senior staffers. While it is crucial that the captains of the ship have all the economic data and tools at their disposal, it is equally important that the economic intelligence be communicated downward throughout their organizations.
After 2017 and 2018, your sales team is likely accustomed to a healthy volume of high-quality inbound sales leads, short sales cycles, and strong conversion rates. Things are likely to tighten up in 2019 and the first half of 2020. Leads will be harder to come by, stretch goals tougher to attain, and the funnel is not going to fill itself.
Your team needs to understand that the external environment is shifting and a more proactive approach may be warranted, whether it be more aggressive pricing, customer incentives, or another appropriate measure. These can save your team from an end-of-year scramble for their targets, after months wasted waiting for a pick-up in activity or bail-out deal that was never going to materialize on its own.
2) Tailor Your Marketing Message Around the Business Cycle
During periods of high growth, your business' pressures and pain points are much different than the challenges that arise when activity slows down or contracts. The same goes for your customers. Arm your sales team with external market data so that they have insight into the vertical markets into which they sell. If they understand the business cycle pressures that bear down on their customers, they can leverage those pressures during the sales process.
To illustrate this, I offer an example from ITR’s own experience: a manufacturer that produces engineered conveyance and material-handling components for specific solutions. This OEM finds that during the accelerating phase of the business cycle, their relatively higher priced solutions outperform competitors' lower priced offerings when they tout that the former allow for maintenance and service while in use. This resonates with customers when their businesses are accelerating. The lack of downtime aligns with their primary concern of the moment: capacity and throughput, or the struggle to keep up.
However, when the economy is slowing down or even deteriorating, the OEM's customers grow more concerned about their bottom lines and controlling costs. In this scenario, the sales team finds success with a different emphasis: that their solutions lead to very little product loss and damage.
What was a primary sales trigger for your product or service 12-18 months ago might not resonate with your client base during this stretch of the business cycle. For a business selling into a half-dozen different sectors, a sales team equipped with individual market insights will be more responsive to your clients' changing needs.
3) De-emphasize Commoditized Products
The falling pricing knife is generally the norm on the back side of the business cycle. We have already seen most industrial commodities move lower year-over-year to this point in 2019, and diminished margins should be anticipated in your commodity products.
Your sales team should prioritize more specialized product and service offerings, which will retain their margins as the current softening in the economic cycle worsens. This will allow your business to remain profitable even if top-line growth suffers compared to last year.
It may also behoove you to warn your team against offering overly accommodating credit terms to secure deals when things slow down. Such moves are riskier as the economy stalls.
Both recommendations tie back to item 1: communication. Your team’s buy-in on the strategy shift comes easier when they are aware of the economic context behind it.
For those positively correlated to the overall economy, slower growth, to some degree, is probable this year, but it is not mandatory. With clear, company-wide communication and modest strategy adjustments informed by external data, it is entirely possible to beat the business cycle. ITR is ready and waiting to help.