iStock_000008869306XSmallThe best way to increase your market share in a difficult economy is to zig while your competitors zag. “Zag” rhymes with “lag” and lagging is what many businesses will be doing that choose to follow the conventional wisdom during an economic downturn. It’s seems that the first thing that businesses do when the economy begins to sour is to start cutting prices, services, and people.

Business leaders should always be diligent in determining if their costs are too high or if they are overstaffed. However, a challenging economy should not be the sole driver for evaluating these business basics. You can easily cut your way to a decreased market share or out of business entirely.

Add Value, Resist Discounting

The Wall Street Journal recently featured an article on Panera Bread. It’s a good example of a zig while your competition zags strategy. While conventional industry wisdom has been to discount heavily, Panera has been able to persuade customers to pay premiums because it has been improving the quality of its food.

Ron Shaich, Panera Chief Executive is quoted in the article saying, “Most of the world seems to be focused on the Americans who are unemployed. We’re focused on the 90% that are still employed.” Now that’s a different perspective than we hear from most businesses. Is it working?

Here are the results so far:

  • Second-quarter sales at stores opened at least one year were flat (better than many in the category who have been reporting negative same-store sales)
  • Same-store sales at company owned stores rose 2.8% in the first 27 days of the current third quarter
  • Panera is projecting growth this quarter in its operating profit, average customer check and number of transactions

The article also notes that many of the stores in the casual-dining category have found that discounting has not only hurt margins, but also failed to lure as many customers as hoped. Brinker International attempted a promotion at its Chili’s Grill & Bar chain where it offered smaller portions of its menu items for under $7. When reporting earnings this month, Brinker said its customers “didn’t consider the deal a good value.”

You can’t discount your way to increased market share. Try adding value instead.

Increase Your Advertising Spend

Advertising is one of the first things your competitors will cut when the economy takes a downturn. That makes it a great opportunity to gain market share by increasing your advertising budget. Media providers are more flexible on pricing because they are loosing business. The old adage of “out of sight, out of mind” applies here. By staying in front of customers when your competitors go “dark” allows you to stay in their mind and keep a positive perception of your business going.

Paul Polman recently became CEO of Unilver, the No. 3 packaged-good retailer. During his second quarter as leader, the company achieved 4% organic sales growth and 2% volume growth that ended a recent streak of flat to negative. These results were better than the competition. An AdAge article quoted Mr. Poloman saying, “Unlike some of the competitive set, we have invested in [advertising and promotion] and spent behind our brands and innovation, and that has given us the growth.”

5 Steps You Can Take to Increase Your Market Share

  1. Make sure you have products and services that people care about (good value proposition)
  2. Resist discounting: find ways to add value like improving product quality and services
  3. Make focusing on the customer a reality, not lip service
  4. Increase your investment in advertising and marketing
  5. Avoid creating layers of complexity—make it easy for people to do business with you

What are going to do to increase your market share? Are you going to zig or zag?