In a Sliding Economy, Should You Zag Instead of Zig?
February 27, 2009 —
“In a sliding economy, the first impulse is to react to decreasing revenue by getting lean, slashing every cost in sight, but first impulses aren’t always rational solutions,” DePue said, after examining the research on business cycles from his office at the Library Center.
“While a selectively quantitative response may be needed, a qualitative response that sees the new day in a new way is also important for the long term.”
He gives these examples from his research:
- Susan Luce, co-owner of a Burlington, Vermont, restaurant, adopts a counterintuitive approach: serve more meals rather than fewer. “It’s been very tempting for us to maybe take away an evening dinner shift or a lunch, but when you start doing that you start losing potential new customers,” she says, defending her decision to institute a Sunday brunch.
- Sales consultant Debbie Mrazek’s advice is to “be bold and go for those big accounts you wouldn’t dream of calling on during a boom time. You just never know what might happen. Chances are you won’t meet with a lot of competition.”
- A McGraw-Hill Research study showed that companies who continued to consistently advertise, even during recessions, perform better in the long run; some companies that took advantage of lowered media prices and adopted a recession-aggressive attitude toward advertising had sales 256% higher than those who didn’t continue to advertise.
- Self-described advertising guru Rebecca A. Novak says that the challenge is to create marketing messages that resound with your consumer’s fears, yet show how your product or service is worth the price.
- Business Week’s Steve McKee adds: “Marketing dollars in a recession are like oxygen on Mt. Everest—the less there is in the surrounding environment, the more valuable the amount you possess becomes.”
As DePue concludes: “Hunkering down and rejuvenating the duck-and-cover drill that those of us of a certain age learned in grade school is a natural reaction, but a more proactive approach may be in your company’s best interest. After all, viewed in calm retrospect, it is clear that duck-and-cover would have been of no conceivable help during a thermonuclear ‘event’ and instead directly contributed to malaise and paranoid thinking and behavior.”
Books on Business Cycles to Check Out at the Library
The Return of Depression Economics and the Crisis of 2008, by Paul Krugman
When Markets Collide: Investment Strategies for the Age of Global Economic Change, by Mohamed A. El-Erian
Pop!: Why Bubbles Are Great for the Economy, by Daniel Gross
Gold: The Once and Future Money, by Nathan K. Lewis