The most common mistake we see business owners make during a recession is fear-based cutting. They get scared, pull their heads back into their shells like turtles and cut back on everything.

—Jimmy Vee and Travis Miller, authors of Gravitational Marketing: The Science of Attracting Customers.

Considering the climate we are in, with consumer spending down, credit tight, the government handing out billions as if they were Jolly Ranchers to little or no effect, there is no question that austerity is the order of the day if you expect your small business to survive the recession. The key to survival, though, is to be frugal in the right way. That said, there are some areas where you should avoid cuts as much as possible.

Those areas are the parts of your business that define you to your customers and your community. To cut costs in these areas would change the way your company is perceived and any short-term gain you get from saving money will be more than off-set by the long-term losses you would incur. The three defining things you should not cut are product quality, marketing and customer service. None of these are more important than any of the others, but cuts to one would, necessarily, harm them all.

Product Quality
Quality counts; there are no two ways about it. Without quality products, what are you marketing? How much of your great customer service would be dedicated to mollifying angry customers as opposed to serving happy ones? One of the great arguments against the automaker bailout was that they make cars no one wants to buy, that their product quality is low as compared to their foreign competition. Until that changes, Honda, Toyota and the others will have the advantage no matter how much money the government sends to Detroit.

Product quality also affects the price-point. In a recent Fortune Magazine piece, Apple founder Steve Jobs had this to say on the topic of recession survival:

Although everyone will be looking to streamline their costs in this environment, I believe that premium brands will only get stronger. A premium brand is a company that offers high-quality products, services or experiences that are worth paying a little more for. Think Starbucks Coffee (an Edelman client), Sub Zero, BMW, etc. How can you become a premium brand that’s worth paying more for?

The answer to that begins with a quality product that stands out from the competition, but there is really more to it. How you market that quality product also counts for a lot.

Marketing and Advertising
The second item on the list of things not to cut is marketing. To many, this seems to be counter-intuitive as the news of the recession worsens and the urge to go into survival mode becomes irresistible. You need to think about this first, before pulling back into your shell: If you are going into survival mode and thinking about cutting back on your marketing and advertising, what do you think your competition is doing? They are probably thinking and doing the same thing. In good times, wouldn’t you say that this is the time to scoop up some of the competition’s customers? How is it any different now?

The reason it makes sense to cut marketing and advertising is the way most business people look at them. According to business guru Ted Nicholas, business owners treat marketing and advertising as if they were expenses, rather than profit centers, not realizing that marketing and advertising actually drive their business. “They cut back or stop advertising, the result of which can be deadly to any business. In a recession, a business must employ effective advertising as part of its marketing program.”

So here, the answer is obvious: Step-up your efforts. Instead of hunkering down and “riding out the storm,” you need to get aggressive with your marketing and use the recession and its effect on your competition to increase your customer base at their expense. You may find that this is far less expensive than you thought it would be. This is because other businesses are pulling back on their advertising and marketing, creating shortfalls for ad venues and that, in turn, often leads to lower ad prices. Take advantage of that! If you do, you may find yourself profiting in places that you never considered before.

Marketing and advertising in support of quality products catch customers’ interest and get them into the store, but they are not the end of the process. For a small business, without solid customer service, the best products and the most effective marketing mean nothing.

Customer Service
You have heard the big box horror stories, the tales of customer service woe from those who have stepped into the big box or, worse, tried to engage them on the phone. Their customer service differentiates them from their small business brethren in that it is almost universally terrible. The reason for that is that these companies are company-centric as opposed to customer-centric. They are big enough and have sufficient buying power offer low prices and so they attract a clientele that is interested only in price and willing to accept whatever cheap products and dull-eyed abuse the bouncing yellow smiley-face can dish out.

What differentiates a small business with great customer service is that it is purely customer-centric. In other words, the business is focused on servicing the customer. This is important since that is the basis of the kind of customer service that brings people back through the doors time and again. Ask yourself, what kind of service would I offer the President or a big-time celebrity if one were to come into my business? Then, when you have the answer, ask yourself if that is the kind of customer service you are offering your everyday customers. If the answer to that is “no” then you have some work to do.

People remember experiences far more than they remember details. They remember how they were treated by a business and they come back to places where they are treated well. Remember, you are there to solve the problems your customers bring to you, whether that is building a home theater, making them look good for a wedding or buying the latest Bakkugon toy to make the whining noise coming from just below the counter top cease. Listening to the needs of your customers and filling those needs is how you make a living. By building relationships with them, making them feel remembered and important, doing whatever it takes to help them if they have a problem with your products, services or company are paths to the kind of customer service that brings people back for more.

Doing the Right Thing
In the end, riding out a recession takes many of the same strategies and tactics that work during the good times. True, you may have to lay some people off; you may even have to trim your product lines and services to focus on what you do best, but as long as what you offer is quality, as long as you market your wares strongly and treat people right, then you have a much better chance to survive than you would if you simply hunkered down and tried to ride it out. Avoid doing that and see what it gets you. You will find yourself with a great relationship with your customer base and with your community as well. You will be competitive and your establishment will be respected. You may even find your business being discussed online through the various social networks popping up across cyber-space. It all comes from taking care of your product quality, your marketing and your customer service. Rain or shine, without these three, you have nothing. If you take care of them, they will take care of you.