Executive
Perspectives

The CEO’s Dilemma
How to Win Market Share in a Downturn
January 2023

Current global disruptions and macroeconomic headwinds
are creating unprecedented volatility and competitive
pressures. Given the unique profile of this downturn,
traditional recessionary playbooks are no longer enough.
This document outlines a new, tailored top-line playbook,providing guidance on how to protect value but also drive
growth in the next downturn. To thrive, organizations willneed to gain visibility on market shifts, safeguard value inthe short term, and invest in seizing competitive advantage
in the long term. Our integrated approach, therefore,balances three key dimensions: sensing, defense moves, andoffense moves.

In this BCG Executive
Perspectives edition, welook at how to turnuncertainty into anadvantage and win market
shareThis playbook provides an array of concrete actions, acrossmarketing, sales, and pricing, from which organizations candevelop their own custom toolkit. Best-practice examples
illustrate how clients have successfully navigated prioruncertainty.
Source: BCG Resilient Pricing Study, September 2022

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Introduction to this document

Executive Summary | Winning market share in a downturn

Why a newapproachis required

This downturn cycle is different with relatively high supply chain pressure, high oil prices, and highinflation, combined with relatively low unemployment and medium interest rates. We see a polycrisis
unfolding, with a unique combination of economic and noneconomic shocks entangled at the sametime, creating increased uncertainty and volatility
Against the uniqueness of this crisis, having a pure focus on cost will not be sufficient

Our new top-line framework helps companies thrive through this polycrisis and future downturns,
building on specific approaches around sensing, defense moves, and offense moves

How to winmarketshare in a
downturn

SENSING: Establish a peripheral radar to ensure visibility into what is happening in the market and toassess the impact of any defense and offense moves
DEFENSE: Safeguard against volatility and maintain market share through defense levers to stabilize
the top line and protect value – mandatory for each company entering this downturn
OFFENSE: Unlock a unique opportunity to win share through a keen focus on each step of thecustomer life cycle and an integrated top-line program cutting across marketing, sales, and pricing (e.g.,
Beiersdorf case study)

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With every crisis comes opportunity, but to seize that opportunity, companies need to invest. Smartleaders invest in digital capabilities to grow market share and build customer loyalty in times ofhigh volatility

Continued uncertainty about future demand and economic stability
Global growth outlook

3

GDP forecasts1 (Real GDP YoY)
USEurozone
GlobalFinancial markets

5

Equity market performance (YTD change)4

2021A

2022E

2023E

2024E

5.9%

1.8%

0.4%

1.4%

5.3%

3.2%

-0.1%

1.5%

6.0%

2.9%

2.1%

2.9%

Oct '22

Nov '22

Dec '22

S&P 500-18.8%-14.4%-19.4%

Eurostoxx 50-15.8%-7.8%-11.7%

Job openings rate7

Oct '22

Nov '22

Dec '22

Change

US

4.64%

4.48%

4.69%

+21bpsEurozone

6.05%

5.26%

5.21%

-14bpsCommodity prices and inflation

Commodity prices2Brent oil
Natural gas
USEurozone

Oct '22

Nov '22

Dec '22

Change

86.5

80.6

80.3

-0.4%

6.4
84.0

6.9
140.0

4.5
74.0

-35.4%--47.1%

Consumer price inflation

4

Q2 '22Q3 '22

Q4 '22

Change

US

6.8%

6.5%

6.4%8

-0.1ppts

Eurozone

3.2%

3.1%

-

-0.1ppts

Oct '22

Nov '22

Dec '22

Change

3.7%

3.6%

3.5%

-0.1ppts

3.0%

-

-

-

7.1%

-

-

-

Unemployment rate9

Corporate spreads (High Yield)52

Labor market

US
Germany
France6

Monetary policy

Monetary policy rates6

Manufacturing

PMI manufacturing (<50 = contraction)10(YoY)3

Oct '22

Nov '22

Dec '22

Change

US

7.7%

7.1%

-

-0.6ppts

Eurozone

10.6%

10.1%

-

-0.5ppts

Oct '22

Nov '22

Dec '22

Change

US

3.25%

4.0%

4.5%

+50bpsEurozone

2.0%

2.0%

2.5%

+50bpsOct '22

Nov '22

Dec '22

Change

US

50.2

49.0

48.4

-1.2%

Eurozone

46.6

47.1

47.8

+1.5%

1. Bloomberg, data as of 01/06/2023. 2. Data presented as end of month figures. Brent oil in $/bbl; US natural gas (Henry Hub) in $/MMbtu; Dutch natural gas (TTF front month future) in EUR/MWh.
3. CPI monthly seasonally adjusted data from Bureau of Labor Statistics; HICP monthly data for Eurozone from Eurostat. 4. Bloomberg. 5. Bloomberg US Corporate High Yield Average OAS; Bloomberg
Pan-European High Yield Average OAS. 6. Federal Reserve for US; ECB for Eurozone (main refinancing rate). 7. Seasonally adjusted rates; Bureau of Labor Statistics for US; job vacancy rate from
Eurostat for Eurozone. 8. As of 11/30 2022. 9. Bureau of Labor Statistics for US; Eurostat for Eurozone. 10. ISM manufacturing PMI for US; S&P Global Eurozone Manufacturing PMI from Markit for
4
Eurozone. Note: All displayed numbers are based on end of month figures. Changes based on incremental changes vs. previous months, except for Job openings rate which is based on changes vs.
previous quarter.

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BCG Executive
Perspectives
AGENDAHow to win in a downturn5

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Why a new approach is required

Pressure on companies is growing during the polycrisis, with the combined
impact of regulatory changes, COVID, war, and the economic crisis
RELATIVE VOLATILITY / CHALLENGE

TIME

Pre-COVID,
regulatory pressure

Regulatory+ COVID

Regulatory + COVID+ war

Regulatory + COVID +war + economic crisis

Post-crisis, volatility &supply issues remain

Pressure on sustainability
and data privacy alreadygrowing (e.g., end of 3P
cookies)

Initial “business freeze” andlay-offs faded & transformed
into issues with supply
chain and labor shortage.
Increasing number of CO2
reduction targets
announced

On top of COVID, warbrought political unrest andfurther squeezed the
supply chain (rawmaterials, energy)

Forecasted decreasing
GDP, uncertainty about the
future, and high inflation
driving rapid change in
consumer patterns

Several pressure factors are
set to continue; timeline ofenergy crisis is unclear,strengthened focus on
privacy and sustainability
likely to persist

Source: Press search, BCG

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NOW

Economic situation two quarters before start of recession vs. Q3/22
Data for US1

Early 2000s Global financial
recession
crisisLow

Global price of Brent CrudeLow
oil ($ per barrel)1

Unprecedented mixof disparate shocks
results in uniquepolycrisis
Additional
indicators

Inflation rate (%)

Low

Unemployment rate
(%)

Low

Interest rate (%)

Low

Business expectation
index

Weak

Consumer sentiment
index

Weak

-0.4
x

1.4

27

89

2.6

3.6

2.9

4.8

1.4

98

High

6.0

High

5.9

High

2.2

4.5

99.2 99.5 99.7

56

78

High

High

Strong84

1. Except for "Supply chain pressure index" and "price of Brent Crude oil" (both based on global data); 2. "Supply chainpressure index" based on transportation and manufacturing indices related to delivery times, prices, and inventory
Note: Relevant quarters: Early 2000s recession = Q4/02; Global financial crisis = Q4/07; Current crisis = Q3/22
Source: U.S. Bureau of Labor Statistics; Federal Reserve Economic Data; University of Michigan; OECD; BCG analysis

Strong7

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Global supply chainpressure index 1,2

Current
crisisLevers that focus only on cost no longer apply in current downturnApproach on cost is effective …
Push on suppliers?

Successful supplier renegotiations for increased flexibility

Streamline organization?

Simplification leads to leaner cost structure

Reduce brand spending?

Short-sighted measure: COVID proved brand spenders saw
2x growth vs. average1

Aggressively decrease marketingand sales costs?

Increased competition makes eroding market share likely

Cut tech programs?

Rapidly evolving pressures require advanced solutions

Rely on consumers?

Strongest downturn in consumer sentiment is yet to come1. Top brand spenders defined as brands in top quartile of increasing brand spending over 2017-2021, methodology: 17-21 CAGR for a sample of large advertisers
Source: BCG project experience, BCG-Google branding study

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But caution is needed to protect the top line …

Every crisis offers opportunities, but past downturns have shown that
only a few companies are able to capture growth in times of uncertainty

25%

Historically, few companies succeed intheir mission
Only 14% of companies improve growth andmargin during downturns
Increasing
sales growth

75%

75% rank pursuing growth as a top

Shrinking
EBIT margin

priority during economic uncertainty1
Defenseplaybook
1. 75% ranked growth in top three (Question: "In your opinion, what are the most important
actions an organization can take to protect itself during times of economic uncertainty?")– BCG survey
Source: BCG Resilient Pricing Study, N = 1.400 pricing decision maker, September 2022

14%

14%

44%

28%

Offenseplaybook

Expanding
EBIT margin

Fallingsales growth9

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75% of companies intend to use
uncertainty as an opportunity for growth1

BCG Executive
Perspectives
AGENDAHow to win in a downturn

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Why a new approach is required

How to navigate uncertainty | Integrated playbook required to take advantageof adversity
Integrated top-line playbook
Sensing

Support business decisions by understanding customers’/clients’changing needs and by discerning market trends
Select actions

In times of swift competitive moves
and rapidly changing consumer
demand, the ability to see where themarket is shifting becomes anessential element for survival

Defense

Select actions

Offense

Forecast supplier prices

Evaluate impact of market trends

Develop economic scenarios

Defend the top line by building resilience across the value chain andfunctions, and reallocating resources to identified priorities

Hence the peripheral radar needs tobe established and augmented
This radar serves as a prerequisite
for every defense and offense
move of the market

Assess spending behavior

Renegotiate against volatility

Focus sales on high-churn customers

Optimize marketing allocation

Shift to less labor-intensive channels

Seize opportunity to win market share by investing in capabilities toexpand the top line
Select actions

Initiate Voice of Customer program

Enhance sales by AI "next best action"

Drive personalized communication

Apply green premium pricing

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Competitive environment

SENSING | Establishing transparency on consumer and competitor
bune
trends is key to evaluating “where to play”

1
2
3

Understanding of demand spaces andmarket dynamics
Insight into own and competitors’
positionsSizing and prioritization based on
opportunity and advantage… which are prerequisites for targeted
selection of defense and offense moves
Reframes market and competitor
view through consumer lensEnables data-driven decisions
about where to compete

Creates growth mindset

Demand maps identify
demand spaces. For eachspace, detailed profiles
show, e.g., consumer needs,
competitors, and value
1. Difference in error relative to capacity
Source: BCG case example, BCG Lighthouse

Case example
Global hotel chain leverages BCG
demand sensing forecast (DSF) to
improve accuracy, model adoption,and transparency
Updated model with new data:• Property clustering• Market demand data
• Airline traffic
using powerful ML algorithm
tailored to each property
BCG DSF improved accuracy
by 37%1

37%

Derives agile test and learn
initiatives to respond to volatility
BCG DSF

Prev Fcst
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Sensing creates insight on market andgrowth spaces along 3 dimensions …

DEFENSE | Hygiene “must-do” actions to protect the top line,
safeguard against volatility, and maintain market share

DEFENSE

Hygiene “must-do” actions from the integrated playbook
Customerdemand& innovation

Monitor and respondto demand shifts

Predict category demand via unified data sources to enable steering of pricing and promotions

Optimize allocation of working and nonworking spending from low to high ROI

MarketingIdentify and cut lowreturn spending

Understand changing channel mix and resulting impact on volumes

Enhance trade spending (i.e., maximize conditional spending) and promotions
Apply B2B order backlog triage to prioritize and renegotiate long-term contracts

Defend customer
base

Protect the top line by focusing on customers with high churn risk
Adapt sales force incentivization to steer toward changing goals (volume vs. margin; pricing)

Pricing

Customerexperience

Organization

Protect and stabilize
margins

Selectively price-up to improve margin realization (e.g., set price premiums)

Focus on effective
channels

Prioritize retention programs to improve satisfaction and lifetime value

Set up leanorganization

Renegotiate contracts to protect against volatility and inflation (e.g., indexed pricing)

Shift to less labor-intensive sales channels, leveraging automation

Build lean and efficient organization while retaining experts and talent

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Sales

DEFENSE | Recent study of a global chemical player’s battle-tested
approach to counter inflation
Playbook from a global chemical player
Faced with unprecedented inflation and product scarcity, leadership embarked on a Pricing Acceleration Program to capture immediate value and drive long-term change

Customerdemand& innovation

Sales

Pricing

Source: BCG case example

Predicted category demand via unified data sources to enable steering of pricing
and promotions• Built AI-enabled pricing engine to generate target price recommendations• Improved data quality of yield, material costs, and demand sensitivity

Significant impact€100M

Impact delivered in less than
12 months in a €2.5B BU+5-10%

Margin uplift resulting fromcontract renegotiations+5%

Average price uplift via
AI-enabled pricing engine+1%

Increase in contribution
margin from yield
management

Protected top line by focusing on customers with high churn risk
• Targeted pass-through of cost inflation based on price sensitivity, considering
share of product in customer's product structure and ability to pass throughSelectively priced-up to improve margins and supported contract (re)negotiation
to protect against volatility• Introduced tactical surcharges for specialty products and revision clauses• Built digital contracting foundations to identify (re)negotiation opportunities

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Hygiene “must-do” actions

OFFENSE | Targeted investments to seize opportunity and win
market share

OFFENSE

Investment “growth driver” actions from the integrated playbook

Marketing

Sales

Pricing

Embed customer
demand into strategy
and culture

Develop singular, customer-centric view on demand fundamentals to guide comm. strategy (e.g., sustainable products)

Seek smart, fastforward looking
opportunities

Exploit opportunities to reframe category, establish new brand associations by demand space (e.g., sustainability brands)

Expand customer
base with highefficiency

Install demand center to drive demand and demand response capabilities

Adopt differentiatedresponses

Customerexperience

Expand channels
and platforms

Organization

Strengthen talentpool

Stay grounded in customers’ needs through robust Voice of the Customer program

Drive personalized communication with AI (e.g., "green" consumers)

Use AI-driven “next best action” for effective and efficient sales
Invest in pricing, analytics, and sales capabilities to adopt new pricing models & enable sales to take active negotiation role
Fund and accelerate adoption of sustainable offering through "green premium pricing"
Invest in new channels: launch D2C channel (e.g., excl. sustainability channel) or partner with channels
Push customer lifetime value (CLV) through engagement and retention via omnichannel loyalty program

Seize opportunity regarding high-potential candidates to complement and strengthen talent pool

Opportunities for push in climate and sustainability offerings

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Customerdemand& innovation

OFFENSE | Case study of Beiersdorf’s precision-marketingtransformation to become best-in-class
Playbook from a global personal-care company
Beiersdorf's Emerging Markets division for Nivea launched a holistic precision-marketing transformation to better navigate coming uncertainty and become best-in-classMarketingConsumerexperience

Organization

Built marketing capabilities with precision marketing• Drove personalized communication via new audience strategy & 1pd activation• Improved marketing planning, budgeting & execution capabilities• Unified marketing measurement to invest in highest ROI activities & channels• Enhanced sourcing models including onboarding & training of 3p partners

Invested in targeted consumer journey• Shifted budgets from traditional media to targeted digital channels withpersonalized and best-in-class CX• Implemented full-funnel approach to address consumers along e2e journey• Partnered with new 3p eCom channels for quality traffic to boost market share

Strengthened talent with extensive capability building & established new WoW• Devised multi-formatted upskilling program, ensuring full-in market autonomy• Overhauled agency model with FTE-based model from fixed to variable• In-housed key capabilities, designed & recruited new Center of Excellence (CoE)• Significantly adjusted ways of working of marketing teams

1. Based on the results of 50 campaigns for efficiency and 20 campaigns for effectiveness conducted in 11 emerging markets
Source: BCG case example

Significant impact

7pts

Additional sales growth,
outperforming market-37%

Media budget efficiency1+124%

Business effectiveness1+300

People upskilled

vs. typical efficiency gains -25-30%

vs. typical effectiveness gains +50%

16

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Investment "growth-driver" actions

Proven experience supportingclients on the topic
OFFENSE | Technology as key lever for unlocking further top-line expansion:
Case study on enhancing sales with AI-enabled lead management

Playbook from a medtech animal health company
Management adopted new digitally enabled sales and marketing engine to engage customers in a more targeted, personalized, and data-driven way to increase overall selling ROI

Personalized
marketingSales.AI

Bionicorganization

Source: BCG case example

Drove personalized communication with AI based on engagement andsales data
• Designed marketing-engine tool for automated lead qualification• Measured prior engagement to optimize approach continuously

Expanded customer base with high efficiency• Built predictive call-planning tools with data-driven recommendations• Employed "next best action" tool to route qualified leads to reps
• Developed data and digital platform to accelerate future builds

Strengthened talent pool to support digitization efforts• Devised multiformatted upskilling program, ensuring full-in market autonomy• Overhauled agency model with FTE-based model from fixed to variable; based on
KPI improvement and golden-rules complianceSignificant impact$120M

Incremental annual sales
impact in primary market

40%

Increased annual sales rep
productivity

2X

Sales conversion rate

4X

Lower time to market for pilot(6 months to 6 weeks)

17

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Technology-driven actions

Key questions all CEOs should be asking themselves now

Has my market intelligence team invested in its
ability to track consumer and competitor moves
in real time?

Have I called a meeting in recent weeks with mycore team to ensure that the required defense
measures have been taken?
Did I ensure the robustness of my organization
for upcoming downturns?
Did I use the crisis as an opportunity to augment
my technology stack to deepen my capabilities?
18

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Do I have a good view of the return on myinvestments in offense levers and the benefits
they will provide?

Connect with our Marketing, Sales & Pricing and Resilience leadershipteams with any questions
Marketing, Sales & Pricing

Central Resilience Team

Andreas Liedtke

Karin von Funck

Ryoji Kimura
Global Leader – Corporate Finance & Strategy
Kimura.Ryoji@bcg.com
Tokyo

Consumer Node – Central Europe
VonFunck.Karin@bcg.com
MunichAlexander Roos

Christina Mühlenbein

Global Co-Leader – Center for CFO Excellence
Roos.Alexander@bcg.com
BerlinManaging Director & Partner
Muehlenbein.Christina@bcg.com
Hamburg

Daniel Feldkamp
Mark Abraham
Global Leader – Personalization & Digital Marketing
Abraham.Mark@bcg.com
SeattleManaging Director & Partner
Feldkamp.Daniel@bcg.com
MunichClick here for our latest publications in the CEO's Dilemma Executive Perspective series and additional resilience insights

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Leader Central Europe – Marketing, Sales & Pricing
Liedtke.Andreas@bcg.com
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