Recession hampers the growth of the organization and creates uncertainty among the people leading to demotivation of the employee. In fact, demotivation is the biggest culprit for decelerating the performance of the individuals. In order to overcome the recession, people do adopt routine short term measures like reducing the cost, reducing the travel, manpower, cutting down welfare expenses offered to the employee, etc. Does it lead to enough saving for the company? This paper is written based on the experience of a company who has faced similar situation in 1995 and how they overcame the scenario. The company was riddled with problems after problems due to mismanagement, wrong investment leading to liquidity crunch. On the top, there was stagnant economy which thwarted the attempt to grow better. The dilemma based was how to turn around in stagnant economy or the recession.
The following steps were taken to overcome the recession:
Cut down the cost of operation specially manufacturing and make the product available at 10 per cent lower than the leading brand.
Outsourcing was the key factor for manufacturing of the pharmaceutical products. At the same time, sourcing of the raw material was done more scientifically and they were obtained at lower price through global sourcing. Workers were told to improve their efficiency leading to better output per shift. This gave the company the cost advantage which helped them to reduce the price offered to the consumers. Lower price means generation of new customers. This helped the company to add on the new list of customers and thus improving the performance per employee.
New market has to be developed: There were many areas which were still untapped. The rural market gives immense opportunity to enter into this segment. The strength of the areas were identified and tapped accordingly. This strategy of penetrating into the market which is near to strong based territory, helped the company to generate business at a faster pace. It also leads to better sales as "theory of diffusion" says that there is bound to be some impact in the surrounding if you are strong in the said area. This strategy helped to prove this concept which in turn helped the company to progress faster.
Develop new market: The new market was defined where the company was unknown. We took up Nepal, Bhutan, Bangladesh and Gulf countries as the market for expansion. Proximity was the key factor of selection of these countries. Moreover, the relationship with the government also helped to penetrate this market. This helped to generate extra volume growth and create a demand for another shift in the manufacturing unit to manufacture the product. The export helped the company to utilize their production capacity more efficiently and thus reducing the cost. Newer areas were taken which was covered as outstation for expansion.
Improve the cash flow: Normally it is tendency of the traders not to pay the money on time. From 60 days credit, credit period was reduced to 30 days strictly. Demand was created so that the distributors will pay the money on time. Extra 1% was given to get the money along with order. This reduced the dependency on the borrowings from the bank and also improved the liquidity crunch. We reduced the inventory level at distribution level by supplying twice in a month instead of monthly supply. This helped the distributor to co-operate with the manufacturer and helped in improving the liquidity of both the parties.
Aggressive on promotion of the product: We became more aggressive by promoting the product to key customers which gave us mileage. The key customers who were contributing about 80% of the business were serviced through repeat visit, contacts and their sales closely monitored. This helped company to generate additional 7% growth through the key customers. Extra money which we generated through the effort of sales was utilized to some extent in promoting the product.
Luxury products in pharmaceutical marketing like vitamins, antioxidants, digestive enzyme, tonic which formed about 14% of the total industry sales were tackled in different manner. The consumer was given spoon, small gift along with this product to create a value addition. This helped the company to improve the brand value as the customers felt that they are getting value for money.
Reallocate people based on their strength and market: We segregate customer profile into A, B, C and changed frequency of call made by the sales people depending upon their capability and business potential of the customers e.g. 'A' class customer will be seeing average sales person twice but 'A' class representative who is good in technical knowledge and selling skills were asked to visit only once. This allocation of call strategy helped to add one more customer to 'A' class representative and make the call more productive for 'B' class representative in the company. This helped to improve call productivity and optimize resources.
Focus on training: People were called for training at different locations. In meeting, besides discussing on sales, time was devoted on up gradation of their skills. This helped people to get more motivated to sell more.
Improving employee engagement through communication: Information was given to the people on regular basis on their performances. This awareness helped the employee to work better. The employee engagement through communication is an important tool in making the people to work harder. This activity confirmed the statement that it is the people who can make the company or destroy the company.
Introduce new products: New products can be a lifeline in recession. This help the company to enter into new therapeutic segments. New products bring growth.
This article is written based on the marketing perspective and was applied in midsize company of India. Recession gives an opportunity to all the professionals to show their capability and also enhancing the growth of the company. Recession can be tackled by not by removing jobs but recession can be tackled by generating demand either from existing customers or new customers by creating new market. Implementation of system will help the company to tide over the crisis. Recession is a step towards success for those companies who are more professional in their approach and follow a pragmatic leadership style instead of deserted style.
(Dr.RK Srivastava is practicing consultant, emeritus prof. and head - PhD cell, SIMSR, University of Mumbai)