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Use marketing strategies to help cope with a recession.

With all of the talk of an impending recession, many foundry managers are looking to marketing for a solution to the problem of keeping in the black. This presents us with one of marketing's biggest challenges: How do we effectively cope with recessions?

Before developing a marketing strategy to cope with a recession, it is important to try to forecast its duration, depth and diffusion. Duration describes how long the recession will last; depth, how deep it goes; and diffusion, how wide it spreads. Diffusion is particularly important because recessions don't affect all of our customer industries to the same degree. Speed of Response

In a recession, casting sales volume inevitably declines. If, in addition, prices fall and costs continue to rise, you have the prescription for a red ink bath. The extent and speed of your response to declining volume will depend on how much foundry profits have shrunk, how deep you expect this recession to be, how long it will last and how price-sensitive the casting market will become.

On the non-marketing side, foundries usually cope with recessions by reducing general overhead, laying off people, instituting more rigorous cost-reduction programs, tightening up their working capital control to increase liquidity, and watching their purchases more closely. All of these moves are designed to reduce the break-even point. If you expect a short, light and fairly confined recession, then less drastic marketing actions are warranted,

In this more enlightened age, some foundries are already attempting to cope with the recession by reducing their marketing staffs. The logic used here apparently argues that sales and prof its produce dollars to be spent for marketing, not that well-invested marketing dollars generate profitable sales. Cost-cutting is certainly required, but not to the extent that it threatens to put you out of business. Marketing Options

There are a number of marketing options available to help combat recessions. Chief among these are: intensifying sales and marketing efforts; changing the customer and casting mix; instituting cost-cutting casting design and redesign programs; and casting price adjustments.

Just because sales competition is most fierce in times of recession, this is probably the best reason of all for intensifying your direct sales efforts. Establish higher call quotas and an increased level of sales effort. The last thing you want to do is reduce travel and entertainment expenses. Also, take a look at other elements of your marketing program. How about a concentrated direct mail effort? What about trade shows? Look for ways to increase your visibility in the marketplace and develop new sales prospects. It is a fact that most industries greatly increase their sales promotions expenditures in periods of recession.

Aggressive efforts should also be made to re-evaluate your customer and casting mix. Particularly in slow business periods, you are better off without some customers and those jobs that are losers. Doing this takes careful attention and a good cost system, but when sales are down it is critically important to plug up all the profit drains.

When it comes to reductions, focus on the buyer's interest and not on his pricing position. This will usually uncover alternative solutions to a negotiating problem. For example, a certain price may be a buyer's position. But, what about quality, delivery and service, which are important interests and should be key elements in the bargaining process?

During recessions our customers experience declining sales, falling productivity, under-utilized capacity and a demoralized work force. Under terrific pressure to lower the break-even point, their purchasing departments search for lower prices, threatening to pull patterns if their present foundry sources don't reduce or hold prices.

Thus, you have to employ price and value positioning to maintain your present customers. And this can sometimes be an opportunity in disguise. Foundries that seek ways to save their customers money through casting design and redesign will find the welcome mat out. At every opportunity you should endeavor to increase involvement of your engineering staff in customer casting design and redesign. A large potential exists for converting fabrications and forgings to castings.

Engineering services are an important marketing asset and availability of your assistance in this area should be made widely known to both customers and prospects through sales promotion and direct sales contact with the customer's engineering and design people. Price Cutting

When business is bad, cutting prices usually only makes things worse. Sales must be increased substantially to recover the dollars lost by the reduced pricing levels. When sales slow down, it takes a good marketing plan and lots of hard work and creativity to turn the situation around without sacrificing margins.

If nothing seems to work, then the only way to increase sales and generate contribution may be to cut prices. However, this should be done only as a last resort and not as a knee-jerk response to try to help out the bottom line. The essential requirement for any price reductions is that profitability from the additional sales should exceed all increases in variable and fixed costs. Just how much discounted business you can afford to take on is a marketing decision and should receive careful consideration.

There are undoubtedly other strategies that you can adopt to help weather the recessionary storm. But, it is important to recognize that there are indeed marketing alternatives, and probably the worst possible course is to just wait and see what develops.

By all means, don't decide to scrap your marketing program at the first downturn. Because this is when so many foundries tighten up, it is the time when your marketing investments will be most productive.
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Title Annotation:Marketing; foundry industry
Author:Warden, T. Jerry
Publication:Modern Casting
Date:Dec 1, 1990
Previous Article:Protecting foundry equity takes planning now.
Next Article:Aluminum Division: growth through technology transfer.

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