Gaining market share during tough times

Buy low, sell high. Good rules to live by for the investment-savvy person. (I, being oh-so-not investment-savvy, usually do the opposite.) The phrase could be applied, slightly altered, to a business strategy: Invest during slow times so you can sell when times are good.

That sounds like a smart, level-headed business rule, and some of the largest companies follow it. Today The Wall Street Journal reported on a study showing that companies that had steady or increased R&D spending during a downturn found big success once the economy kicked back into gear. Apple"s iPod is a shining example. R&D for the device that helped propel Apple"s growth during the last decade started in 1999, and it was released during troubled economic times--in 2001, just one month after Sept. 11.

But Bruce Hamilton, president of Boston-based lean consultancy GBMP, takes this concept another step. He suggested that companies don"t just hang in there and wait for the upturn. Now, he said, is the time for the best companies to get aggressive, ramp up advertising and marketing efforts, and gain market share.

"There's a tendency for companies to retrench," he said, by going to the floor and laying off people. "The next thing they do is cut their advertising and product development budgets--and these are just the things a company should be investing in during a downturn."

Some of the best companies, he said, are making the investment. "We've seen many companies swing into steal-market-share mode," Hamilton continued. "Considering the overall economy, the pie hasn't gotten any bigger, but if their competitors are dealing with a bad economy by laying off workers and cutting back on resources, those competitors are weakened. That means they can"t deliver, and they're not reliable. So there's no better time to capture market share."

Of course, to capture market share a company must offer something competitors don't. And VIBCO, Hamilton said, is one of those companies. A maker of industrial vibrators, the Wyoming, R.I., manufacturer hasn't retrenched but instead has scaled up its marketing efforts. It offers a unique product that's applicable across a range of industries. It's used to shake cement out of trucks, level stacks of newspaper--anything, in fact, benefiting from high-frequency vibration. And, most important, the company has such a lean shop floor that it can deliver most products the very next day.

The company's competitors can't match VIBCO's delivery time, he said, and "they're leveraging their flexibility to add new customers. In the construction industry, it's important to get something like overnight."

Wait a minute. Did he mention the construction industry? The same slow industry that has forced companies like Caterpillar to lay off thousands? This, Hamilton said, proves another point: Customers in even the slowest sectors are looking for ways to cut costs. If a product or service can save time and money, those customers may be more willing to consider something new today than during good times.