January 23, 2023 How to Recession-proof your Business in 2023

The experts at Vendavo have tapped into their collective knowledge with tips on how to recession-proof businesses in 2023.

Over the last few years, businesses have faced unparalleled economic uncertainty and volatility making profitability, revenue, and growth more important than ever. Persistent inflation, supply chain issues, and global crises have forced companies to prioritize agility and develop recession-proof business strategies. As uncertainty remains the only certainty, the experts at Vendavo have outlined how businesses can prepare for any economic state, especially a recession, and why this preparation has never been more important.

Americans already believe the US is in a recession

According to the general definition, a recession is defined as a period of economic decline, identified by a fall in GDP in two consecutive quarters. Last year, the BBC reported that “​​US GDP had fallen for two consecutive quarters – 1.6% during the first quarter of 2022, and 0.6% the next.”

In August last year, data from YouGov revealed that over 3 in 5 (61%) Americans already believed the US was in a recession, while a more recent poll highlighted that almost half (47%) of US citizens believe that the economy is getting worse.

Despite the inflation rate slowly falling in more recent months, figures show that, at 7.1%, it’s still over 5% higher than it was in January 2021.

What can businesses do to be prepared for another recession?

The US has experienced nearly 50 recessions. Throughout history the most resilient firms during recessions focused on the right mix of mindset, behavior, technology, and efficiency by:

• Providing consumer essentials
• Segmenting products and services
• Creating new products and services

Taking measures to be prepared is one of the most crucial ways businesses can help avoid feeling the immediate and long-lasting impact of a recession or economic downturn. As preparation can also help avoid short-term reactionary steps, there’s still a chance to not only thrive but also gain new customers while retaining existing ones.

What should businesses do to plan for a recession?

Focus on the fundamentals: As a business grows, naturally new products and services follow. However, in the face of a recession, it’s a good time to go back to the fundamentals, focusing on profitable growth. First reinforce your core products – identify what originally attracted customers and why they chose to stay. Then innovate and make important investments in areas that were not previously prioritized. This will help you prepare for the next ten years of growth.

Listen to your market: In recessions, most buyers change their buying priorities and decision processes to at least some degree. During this time, it’s more important than ever to listen to your market. Explore what buyers value, how they discover it, and how much they can afford to spend. Price segmentation is often very profitable at this point because not all buyers respond the same way.

Gain a deeper understanding of your customers: Your customers will be feeling the economic effects of a recession, just like your business is. Avoid the temptation to dramatically cut prices – as this can start a pricing war and impact your ability to run your business – but gain an understanding of what your customers need and want. Ask yourself:

• Why do our customers purchase our products?
• What void or need do our customers fill in good times and in bad?
• Is our product easily replaced by a cheaper competing product?
• How recession-resistant are our customers?

Don’t start, and avoid engaging in, a price war: It’s inevitable that some businesses and industries will find themselves cutting prices where possible to retain customers, but avoid participating in a price war. Instead, find a way to provide more value for your customers – consider what they need and what they can use – versus automatically dropping your prices.

Most importantly, don’t panic: Businesses will inevitably face recessions, economic downturns, and rising inflation. But, it’s important that business leaders and pricing teams refrain from hitting the panic button. Focu on the value you provide your partners and customers to help reinforce the benefits for your marketplace.

More insight into what businesses can do to be recession-proof can be found here.

About Vendavo: Vendavo’s AI-embedded Pricing and Sales solutions power the shift to digital commerce for the world’s most demanding B2B companies, unlocking value, growing margins and accelerating revenue. With the Vendavo SaaS Commercial Excellence platform and our best-in-class CPQ and price optimization solutions, our customers develop dynamic customer insights and optimal pricing strategies that maximize margin, boost sales effectiveness and improve customer experience. Vendavo has offices in Denver, Düsseldorf, Prague, and Stockholm. For more information, please visit http://www.vendavo.com.

Subscribe to Industry Today