Is a downturn a good opportunity for start-ups?

Is a downturn a good opportunity for start-ups to embark on a business
Let me mention at the start that in a downturn, most are cautious and adopt a wait-and-watch policy, but the ones in first, bright and early, gain the ‘Watsonian’ worm, a first-mover equity which could prove crucial for customer loyalty base building and long-term market share. And usually in a downturn, the academics would hesitate venturing out but not an intuitive business-savvy individual since he sees an opportunity which others would baulk at, in their conservatism. Competition, also generally toe the academician line and would not react to a newer initiative by someone else within the industry, with the same force or money spends to counter in an otherwise stable environment, thus softening the blow on the risk of customer attrition. This could prove crucial for creating an ideal platform for a start-up.		Every crisis is an opportunity. When the economy dips, start ups rise. Many people losing their job and facing pay cuts have started venturing out on their own. The cost of setting up a start up has come down drastically and they can reap the benefits once the recession is over. While the existing established players are becoming too conservative and shelving projects, and with some of the players closing shop, it is definitely an opportunity for a start up. If you were afraid of those gorillas eating your startup’s market, this is time for you to take that bet. While the gorillas are being cautious, you should run like a gazelle and get to that post.
What is the best way to build marketshare in a difficult market?
Do not attempt to re-invent the wheel. Sometimes innovation is an abused term for over-spending! Stick to the basic 4 Ps of marketing and the trick is to do them better than competition (for which you need to ensure your sales team is on the ground and you are listening to them more closely than ever before). Focus on knowing the customer, whether an end consumer in FMCG or purchase/operations team at an OEM or industrial environment.		Whether it is a boom or gloom, certain basic strategies for building market share remain the same – know your customer, get smart with your customer data, grow relationship with existing customers etc. As soon as the word “recession” spreads, companies look to cut advertising and marketing budgets. In reality, this is the best time to gain marketshare — as your competition cuts away. Eliminate marketing that is not working and be aggressive with value-added offers that differentiate your products from the competition.
Should a new business focus on lower prices or new products?
Two different strategies emerge here as it depends on the industry context. Scenario one, Lower price should not mean lower margins for the company as it defeats the very purpose of a business enterprise! Strategy should pervade through the organisation’s various functions and processes aligned to give the lowest cost for the product. Scenario two involves deeper investments in R&D and innovations in the industry constantly. This again drives a different strategy orientation amongst people and processes to create differentiated products which if positioned uniquely can unlock tremendous value.		Both the price and new features are equally important. No business can focus on one at the cost of another. Think of the real stuff for which people will pay real money. In these difficult times, I would be cautious working on a service or a product that has a perceived value but no tangible value to the customer. For a moment, forget you can create value based on perception and hype. Brand equity may tolerate price increases, but add-ons are what attract customers during difficult times.

 
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