As the reports of company shutdowns and employee layoffs continue to dominate the financial news worldwide, it would be understandable for small business owners to feel slightly panicked about their future. How can they possibly survive, much less succeed, in the middle of a global recession?

Last week we explained that entrepreneurs can weather the economic storms by adjusting their offerings to meet changing customer needs. In fact, small businesses can be more flexible at creating innovative products or services to take advantage of new opportunities, unlike many large enterprises.

Once your product or service is designed to meet the current needs of your customers, the next step is to maximise your marketing. Many organisations look to cut costs by reducing their marketing budgets, but to outlast the tough times, you actually have to increase your promotional efforts.

Change Consumer Confidence

It’s important to understand consumer psychology in a financially challenging environment. Even if their jobs are not at risk and they have enough money to buy, the consumers’ natural inclination is to keep their money in their pockets, just in case something disastrous happens. In addition, for those who have lost their jobs, spending on anything except necessities is not a priority.

How can small business owners continue selling their products and services when the consumer confidence to buy them is low?

Here are two ways to encourage consumer spending:

1. Give customers a financial benefit to buy;
2. Look far and wide for willing customers.

The good news is that you can use free or low-cost methods, in addition to traditional forms of marketing, to achieve these goals.

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Create A Compelling Need

If customers are shunning your product or service because they perceive it as being non-essential, is there any way you could create a compelling reason why they really have to buy it? Marketing is all about promoting your offerings as the solutions to people’s needs.

For example, a salon could run a campaign offering layoff specials designed to give customers the professional look they will need to get a new job. A computer store could offer low-cost computers and support services to help people start a business from home. These businesses could target workers at companies that have announced redundancies.

Construct A Customer Referral System

Referral marketing is a way of using your existing customer base as a sales force to spread the word about your operation. Think of how eager you usually are to check out a new restaurant or movie when a friend gives you a glowing recommendation. The same process can work for your business, if you give your customers a good reason to encourage others to give you a try.

If you have regular patrons who can no longer afford to buy from you, how about creating a system that allows them to get discounts, free products or even cash, in exchange for bringing in new paying customers? It’s a win-win proposition!

Campaign To Catch Customers

Networking, the art of making connections with people to expand your circle of influence, is one of the most important tools to grow your business. However, it is often overlooked by entrepreneurs who sometimes neglect to even tell close friends and associates about their business ventures.

Get out of your comfort zone and go around and tell people what you do. Start by focusing on groups that you may already be a part of, such as past students’ associations, religious institutions, or your children’s PTA. Then increase your networking efforts by joining service groups such as the Kiwanis or Rotary clubs, or professional groups within your industry.

Collaborate To Canvass Support

Social networking is simply the grouping of individuals according to shared interests or demographics. Social networking takes place in schools, workplaces, churches and communities, but it is most popular on the Internet. Millions of people use online social networking to introduce their businesses to the world.

Join a social networking site by going directly to the website and registering. Depending on your particular business interests, select the network that provides the best contacts. MySpace is essential for music industry practitioners, while LinkedIn and Plaxo concentrate more on business professionals. Facebook, the most popular social network, has a great mix of personal and business users. You can set up a special page for your business or create your own community that can attract persons with shared interests.

Next week we will look at other practical tips that small business owners can use to conquer the challenging economic times.