- Don’t believe that you have to follow the pack into discounting and other profit-robbing promotional offers. They harm you now, and customers remember how little you valued your product even after times get better.
- Look for ways to appeal to self-satisfaction and personal significance needs of your customers. This can be as simple as making sure the customer service training you never really put in place is not only in place, but is being taken seriously. It may require revamping of your approach to satisfying customer needs that has been overdue for some time, but you thought you could get away without addressing. It may require some deep analysis of what customers have NOT been telling you and your researchers, but have been telling other people they really desire but aren’t getting.
- Innovate, but not necessarily with new or better products. Focus instead upon how to create new and higher customer expectations than your competitors address, especially in ego-satisfaction. Product innovation can often be helpful, but a downturn is usually the worst time to introduce new products UNLESS they drive and satisfy emotional, experiential, and ego-satisfaction needs. Product innovation is far more costly and less effective almost any time than is innovating new ways to drive higher experiential expectations, but especially in a downturn (or a feared one).
How to weather an economic downturn – Part 1
How consumers react and what you can do about it
In an economic downturn, consumers react even before there is a real downturn due to the growing media coverage that creates fear. It’s a strange paradox that a real economic downturn doesn’t even have to exist for the effects of one to start. So, what can you do about it?
Start by understanding what consumers (and most buyers of all kinds) do when they start to fear a coming economic slowdown. The first and most obvious thing that happens is that they think about pulling back and weathering the storm. They look for ways the might cut costs or financial commitments in things that don’t affect their self-satisfaction or personal significance – the two critical factors that Alpha companies address, often to the exclusion of focus upon product functionality. Consumers start asking, “What can we cut out that really won’t make a difference.” What they mean is things that won’t diminish how they feel about themselves or how they believe others see or feel about them.
The second thing that happens is that they start to fulfill their need for feeling good about themselves and life in general (self-satisfaction) by increasing their purchases of items they believe will accomplish that. That’s why every recession is accompanied by increased sales in alcoholic beverages and fairly stable sales of splurge items like high-end ice cream or fancy coffees. These items help them believe they are not “doing without” across the board.
Thirdly, they desperately look for fulfillment of the significance needs by looking for items that make them believe others will admire them for buying and using it. Recessions typically see much less negative effect upon “image” products, such as designer clothes (although the money may shift to “knock-offs” or “outlet” purchases) or other items that reflect well upon the owner. Right now, according to recent sales figures, while American and even Japanese auto dealerships are struggling to survive, Mercedes dealers are only barely down in total. The best dealers who have proven themselves capable of selling these cars are at about even with last year.
So, how can you react to a market already reacting to a possible future downturn?
How can you innovate to drive new, higher ego-satisfaction expectations? Start by changing your marketing research from looking at what happened yesterday and from believing the superficial answers most customers give to researchers (such as, “Price was the deciding factor”). Delve deeper for things customers wish they were getting, but aren’t. Most importantly, discover the things they never even mention, because they don’t believe products in your category can be expected to satisfy those needs. Then innovate to satisfy those things that you can to address at least satisfaction and possibly even significance.