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The High Tech Market Crash: How Businesses Can Pull Through

It's safe to say the past decade has been kind to the high-tech industry. The wide availability of capital, a booming economy, and a significant shift from on-premise to cloud computing created the perfect breeding ground for such companies to thrive and succeed – and that they did.

Posted: 20th July 2022 by
Finance Monthly
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In 2021, the Big Five tech giants—Apple, Amazon, Google (Alphabet), Meta, and Microsoft—generated a combined $1.4 trillion in revenue. But as the saying goes, “what goes up must come down,” which is precisely what many analysts believe is occurring, with the recent market crash. Fear is spreading quickly that we may be about to enter an era just as bad as the dot-com burst.

How bad will it really be, nobody knows. But if one thing is for sure, the companies that put plans in place to ride out the storm will certainly fare better than those who do not.

In fact, if we take a look back to the financial crisis of 2008, 14% of public companies managed to achieve a sustained period of growth, largely due to them acting early, taking a long-term approach, and focusing on growth and not just damage limitation. With this in mind, we have created this article with four quick tips that discuss how tech companies can prepare for the unknown and give themselves the best chance of making it out the other side unscathed.

Focus on product-led growth

With client acquisition expenses skyrocketing and a global recession on the horizon, it may be worth contemplating a shift to product-led growth (PLG), a new go-to-market approach that emphasises the product as the key engine for acquiring, activating, and retaining consumers. Instead of spending money on advertising or sales outreach, the product acts as the company's marketing engine.

Most PLG models give priority to the end-user being able to gain easy access to the software, so they can interact with it and give it a try for themselves. The purpose behind this approach is that it creates an environment where the prospect can discover the product's value in a situation relevant to their particular wants and needs. Moreover, prospects are significantly more likely to make the purchase and convert from a lead to a paying customer after they have experienced value personally. 

Fortunately, PLG is simple to achieve with SaaS sales experience solutions like Walnut, which specialises in facilitating high-quality product demos that are engineered to convert from the bottom up. Walnut's principal goal is to provide the most customer-centric experience conceivable by supplying sales representatives with all the tools and capabilities they need to directly appeal to each prospect's specific wants, needs, and pain points.

Walnut does this with its simple, intuitive no-code software, which eliminates the need for back-end teams such as graphic design and IT departments to be engaged in demo production. This gives the teams presenting the demos complete control and creates an atmosphere in which prospects may freely interact with your products in a way that is directly relevant to their requirements, thus facilitating a product-led growth strategy.

Drop unprofitable products/services

During a market crash, cash is tight. Typically, this results in both consumers and businesses looking for methods to reduce expenses, and tech companies should be no different. However, it's savvier to take advantage of a recession by eliminating any excess weight that your company has been carrying rather than cutting back on critical business operations.

For example, if your organisation has multiple MVP dream projects that are depleting your cash reserves, it would be prudent to postpone them until a later date. Remember that a recession is a great time to focus resources on what is already working for the organisation, not experimenting on unknowns. 

Reduce customer churn

As clients' budgets tighten, subscriptions may be one of the first things they decide to cut. To overcome this issue, SaaS vendors could provide clients with incentives or discounts to help them weather the storm. Take Salesforce, for example, which released a new business grant scheme in 2020 designed to help SMBs survive the early stages of the global pandemic.

While you don't have to go that far, things such as modifying subscription prices/plans, providing free trials on paid features, or introducing live technical assistance might help to persuade clients to continue with their existing SaaS solutions until economic conditions normalise. The aim of the game is to provide the most value to clients in order to gain their loyalty and reduce churn.

Don't kill off your marketing

Whatever strategy you use, it is critical that you resist the urge to halt your marketing activities when an economic slump is approaching (which seems to be what most companies like to do). For one reason or another, many organisations erroneously view marketing as a cost centre rather than a profit centre, especially when it comes to B2B companies. 

Unfortunately, organisations that reduce marketing expenditure and trim down content creation rapidly learn that the benefits earned by their marketing team in prior quarters are undone when they are let go or defunded. After all, search rankings deteriorate quickly, bidding strategies become ineffective, and algorithms change. While these companies may be more insulated from the short-term effects of the recession, they will likely suffer in the medium and long run and may find it difficult to recover the momentum they once had.

Conversely, tech companies can use poor economic conditions to their advantage by making smarter marketing decisions. Instead of cutting back, executives should view the recession as an opportunity to leverage a less competitive environment by raising marketing spending. In turn, this could create a competitive advantage over rivals, who could be scaling back and adopting a more short-term approach. 

Final word

Tech companies must use this time to prepare for the worst by implementing strategies to protect themselves from what is to come. Although, as we have touched upon, economic downturns often present an unlikely opportunity for firms to grow. Rather than sitting back and playing defensive, the market crash may actually be a time that tech companies can use to seize a larger market share by ramping up marketing efforts, streamlining their product offerings, and focusing on delivering maximum value to their current user base. 

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