By: Joshua C Pies, Chief Attention Getter
The world shut down in 2020. It is likely the weirdest time in your life as a working adult, but it is NOT the first recession we’ve been through. Provided you’re over 30 you’ve actually lived through at least one yourself. Even so, people are rarely students of economics in good or bad times – and in bad times people often fail to be fully observant of their surroundings because survival becomes paramount and fear often clouds the mind. With that in mind, you may not be aware of a nasty habit that businesses have during times of economic contraction. This nasty habit is a behavior where the limited resources that we all have in life, now even more limited, are utilized with a survival mindset instead of a growth mindset.
Survivalists preserve what appears to have “value”.
In business it might look like this: A manufacturer who has materials on hand and inventory in stock may choose to keep creating new inventory. This seems prudent. Each widget they create has a sale value of X and that means it has “worth”. The manufacturer is not minting gold but it does feel like it because each item has a potential dollar sign attached. At the same time, what does NOT have tangible value is often sacrificed. Marketing, branding, and sales are often hard to imagine as profit centers because they don’t “make” anything. It is for this reason that they are often reduced during a market contraction in an effort to help a business weather the storms of recession. The failure here is that the limited resources of time and money are being spent on creating products WHILE IGNORING CONSUMER DEMAND.
Sounds a lot like Supply and Demand, doesn’t it? It is.
Let’s think about a generic supply and demand example:
The Supply Curve – your available product or service – is on the curve the sweeps up to the right. Consumer Demand is on the curve that sweeps down to the right. The point at which they cross is called “The Margin”. That cross point correlates to the ideal price (seen on the Y-axis) and the ideal quantity to produce (seen on the X-axis).
Let’s imagine that a recession has hit. Your Demand Curve is affected by consumer’s available funds. Their price tolerance has fallen so your curve moves LEFT. That moves the cross point of your two curves down. You should now produce less product and deliver at a lower price if possible. If that is true, then why would businesses pour money into supply side efforts?
They want something to hold on to and that just so happens to feel like product or the means of production fit the bill. If we maintain producing at the “old margin” or Q1, then we have a surplus of product and we carry inventory EVEN if we meet the market at a lower price (seen as P-New). If were were silly enough to increase supply we’d be in even worse shape.
If and when demand for your “thing” falls the right answer is to work to pick demand back up instead of pigheadedly maintaining supply.
If we choose to move our attention – and limited resources of time and money – to work on moving the our recession demand curve (Fallen Demand) back to where it was or beyond it (Renewed Demand) we have a better situation. Let’s also assume that because you shifted resources to marketing that your quantity of production necessarily fell. In that case you have lowered inventory on hand and effectively raised price tolerances. You will sell out and have a shortage which you can choose to work to meet or leave them wanting more.
The right next question is: How do you increase demand?
A recession is the time to double down on marketing. Let me help you double down by knowing which cards to play and which to hold. Let’s start with hold cards:
- Hey Look at Me: This is the marketing card that too many businesses lean on. You know this kind: “We’re Award Winning”, “We’re 75 Years Old”, “We, We, We”. It all seems very self aggrandizing.
- Mindset: While I love that you want to get your mind right, you are likely not Tony Robbins so don’t feed your audience with a pile of mindset advice no matter how topical to a recession it may be. (I see this a lot… and it’s very weird)
- Old Campaigns: What used to work probably will not work as well right now because your consumer’s preferences have been altered by the economy. You need to do and say some things differently to appeal to their current state of mind and being.
Now, Here’s the Cards to Play.
- Path Maker: This is storytelling where you set up a real problem and then you show how you are the guide who helps YOUR CUSTOMER solve it. You are NOT THE HERO. You are a guide who shows your customer how to walk the pathway to success. Of course, your pathway includes your product or service. (The book this is inspired by is called Building a Story Brand by Donald Miller. It’s a big influence in my work and you should read it. )
- Brand Establisher: Your product or service has nuance. Even if it is a commodity – let’s say, corn… There is nuance because the nuance is you. How you care for your farm, your employees, your product and why you do it is all part of your brand. It is also why people may choose you over the farm down the road. We suggest you lean your brand on your “why” (Famed TED Speaker Simon Sinek’s talk on “Why” is a good lead on the type of declaration you can make in your business both internally and in your marketing). Why you do what you do matters. Remember though that this MUST work like Path Maker’s card. Your customer must see their own values align with yours so that they can live out their life’s values by becoming part of your tribe as a consumer who is like minded with you. You establish your common ground when you establish your brand. This is true also of the most non-commodity products, lifestyle brands. Everything from a Kardashian Family fashion line to the Supreme brand and Vans shoes have a lifestyle association that justifies their existence as much if not more than their raw product’s value (a Supreme T-Shirt can be more than $100 but the same cotton is used in a $5 Walmart shirt). Expressing your brand in a way that enhances bonds with your customer through common ground is really important when demand may be shifting because of economics.
- Education: This is likely my favorite. The more you freely build up your audience with valuable, actionable information that has relevance to them the more likely you will gain their loyalties. The educator is the expert. Experts get recommended. Experts get the gig when the gig comes up. Expert product and service providers win, often when their product is more expensive. You become the expert because you are trusted and the pathway to trust is to give high quality education.
The moral of the story in this is that MARKETING and SALES need more funds and more freedom in times of economic contraction. They must bolster your Demand Curve.
NEVER cut Marketing. Never cut Sales. You may reimagine how you market and how you sell – growth in understanding how you approach things can be very good. The opposite, contracting your marketing and sales efforts to protect product and means of production is a recipe for falling demand, overstock of product, and falling sales prices. Survival instinct can crush your business. Play the right cards and play them more now than ever.