Reading the papers, you could be forgiven for thinking it’s the end of the world as we know it. Soaring oil prices, rising food costs, tighter credit, an ailing housing market. Each day brings a fresh wave of bad news.

Time to tighten our belts. In an economic downturn, it makes sense to cut your costs.

But just make sure you’re cutting the right ones.

Slash your marketing and you slash sales. And if sales take a hit, then you have to cut your marketing a little more. Before you know it, you’re in an unstoppable downward spiral.

So what can you cut? Well how about admin costs, travel expenses or entertainment? Renegotiate your rent, find a cheaper deal on your phones.

But don’t cut your marketing. Not until you’ve cut everything else first.

Because marketing is the only thing that will pull you out of the dive.

Think smart, think big

Consider what’s happened in the airline industry. All carriers are faced with massive fuel bills. And that, together with the credit crunch, has caused their revenues to plummet.

But they’ve responded very differently.

British Airways says it’s going to put up fares by 4%. It has to, it says. It’s got no choice.

Really?

Well just look at what Ryanair is doing. Shortly after announcing a £70m loss for the first quarter of 2008 (compared with a £123m profit in the same quarter a year ago), Ryanair said that it was going to take some radical action.

It’s going to reduce fares by 5%. And then it immediately put 1 million tickets up for sale on its site at next to nothing.

It can afford to, because during the good times, it’s amassed a war chest of €2.2bn. So in the fight with bigger carriers, it’s in an unassailable position.

And it’s sending out a positive message to its customers.

Same again, sir?

Starbucks is doing the same. Realising that a grande hazelnut frappuccino might not be top of your list of absolute necessities in these harsh economic times, it’s introduced a free filter-coffee refill for the first time in the UK.

The cost to them is minimal. But the goodwill it gains them is beyond measure.

(If you read my previous entry on ‘freshly brewed’ coffee, you’ll know this is a mixed blessing as far as I’m concerned.)

Five things you can do right now

The best solutions are always simple – and often, they’re so simple we don’t even think of them.

1. Get more business from existing customers. You know who they are. They’re qualified, they’ve bought before, and they’re just waiting to hear from you.
2. Stay in touch. When times are bad, step up your customer communication. Tell them you’re around, and that you’re here to help.
3. Add value. Give away for free things with a low cost but a high perceived value.
4. Run the numbers. Analyse your sales data and see which products bring in most revenue – then focus most of your marketing on them. Do the same with your customers.
5. Think like a customer. Don’t forget – they’re feeling the pinch too. So what would make the difference? What could you offer them right now that would make them buy?

Think smart in a downturn, and you’ll be better placed than anybody else to reap the rewards when the upturn comes.

And it always does.

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