Internet Marketing Blog

Marketing in a Recession

February 22, 2008 – 1:03 pm

Wow, what a year 2008 is so far. With a heated race for the White House, the largest viewership of any Super Bowl to date (a consistent 97 million), not to mention the outcome, and the largest Internet merger looms. That’s the good, the bad is the sub prime housing market credit debacle, traditional energy crisis (oil and other natural ores) and thus, the threat of a recession.

In the last 25 years the United States has showed substantial economic expansion, widely considered the worlds most powerful economy. The only major blips on that growth were in 1991 with the collapse of junk bonds, which caused a credit crunch and in 2001 with the dotcom crash, September 11th attacks and accounting scandals. In the minds of many a business operative these were periods of recessions. However during these times the GDP (gross domestic product) did not fall for two seceding periods and thus the last official recession was in 1982 and 1983, caused by tight monetary policy in the U.S. to control inflation and sharp correction to overproduction of the previous decade which had been masked by inflation.

What does it mean to businesses facing a recession in 2008? Recessions are interesting times, and studies show that recessions can make companies just as often as break them. A study, from 2004 of 700 U.S. companies that weathered the 1991 recession, found that twice as many made the leap from laggards to leaders in their sectors during the downturn, as during surrounding periods of economic calm.

Witness Walgreen Company: the Chicago-based drugstore chain made plans to come out on top in a reshuffled deck. In the midst of this recession, the company focused on expanding its lower-cost, generic drug business and outstripped its industry’s growth. The result? Walgreen’s grew earnings and sales in Q4 2001 by 17% versus the prior year, and gained market share on its key competitors. All at a time when many drug retailers face capital constraints and a shortage of pharmacists.

The flip side was K-Mart: it lost significant ground during the retail downturn of 1991 and plowed downhill from there all the way to Chapter 11. Meanwhile Wal-Mart continued to invest in service infrastructure and rolled back prices to gain an estimated 2 to 4% in comparable-store sales over direct competitors, K-Mart and Target.

The effects of economic downturn differ considerably by sector and company. Even the deepest recessions have bright spots-in the U.S., likewise, different industries experience recessions on different timetables. In the past three decades, at least 25% of all U.S. industries have battled a downturn in any given year but 1984, when GDP growth soared to more than double the norm. For companies that plan to win in a recession, the good news is your sector may have some bright spots. These hidden opportunities deserve attention now, before it’s to late.

• Prepare to do some business to insure that your practices are not hampered and that you stay strong and grow in a “weak” economy. If you plan for a reshuffle, focus on your core and seize acquisition opportunities, if done correctly you can increase your product and market impression during such uncertain times. This calls for executives and their teams to make educated, well planned strategies that focus their time and energy on the right clients and markets.

• As happens, during recessions the first place businesses look to decrease spending is from the marketing and advertising sector. So marketing and advertising industries, if they don’t already have them, need to prepare long-term contracts and nurture existing relationships with other companies in hopes to sew up their dollars. Looking for projects that sustain through to 2009 and beyond is what should be considered now for marketing companies. However the shifting of ad revenue, from print and television to Internet is offering some amazing opportunities.

• Continuing on that thought, Renewable Energy Sources like solar and wind will remain unharmed in this current financial climate. “Green” industries are sure to be the big winner in this stretch of the US economy. As this platform gains in popularity and focus, its attributes of efficiency, freshness, global awareness and (now) affordability, will propel this new sector clear from the sinks of a recession. Some solar companies are experiencing so much growth right now that they fear if they get any bigger they wont be able to handle all the business.

• A last note about notes. The strength of email economics is so underscored, because it is such a necessity, it becomes somewhat second nature. The power and reach of email has become a must for business, as it is simply one of the easiest, cheapest and most direct ways to interact with your customers. There is no better direct avenue in business to get to your target audience than email, and the fact that email is a near free medium it should be at the top of your list in any economic climate.

Like any good economic problem, it is made up from the equation of its parts. A recession does not mean that business stops or that the consumer goes away. It may mean a few extra hours in the office-mind and maybe some hard negotiating nights but it’s the cost of doing business. The spirit of free enterprise is a hard thing to keep down.