The Recession is Over?
This topic illicited some interesting discussion on the show last night, so I thought I'd extend the conversation here.
I think the key take away for me is there is a huge difference between ending a recession and getting true recovery. And the big question for me is, how do marketers navigate these waters?
There's also the fact that we may have shot ourselves in the foot by assuming all consumers are equal and discounting like mad to drive sales. But I'll save that rant for tomorrow's blog post. ;)
What are your thoughts?
I think the key take away for me is there is a huge difference between ending a recession and getting true recovery. And the big question for me is, how do marketers navigate these waters?
There's also the fact that we may have shot ourselves in the foot by assuming all consumers are equal and discounting like mad to drive sales. But I'll save that rant for tomorrow's blog post. ;)
What are your thoughts?
Tags: discounting, recession, recovery
Replies to This Discussion
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Permalink Reply by Marcus Fox on -
Not heard the show yet, so I might be slightly off-topic. A recession like this one will only make consumers more price sensitive and the biggest challenge will be lifting prices again. Generally speaking supply and demand should sort this one out. But over the last two years the wider public have talked themselves into assuming that they can get prices down. So we should get back to the basics of promoting quality and all good ol' brand values.
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Permalink Reply by Bob Knorpp on -
I don't want to spill the beans on my blog post, but that ship may have sailed. Retails ignored the advice of brand marketers and discounted to raise sales instead of investing in brand position. This ignored the fact that a good portion of consumers were not personally affected by the bad economy. So assuming all consumers were bad off led a sense of entitlement and spending-reticence across all consumer groups. Credit to Karen Tabaka for these insights. Hoping she'll post her full thoughts here.
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Permalink Reply by Karen Tabaka on -
So the recession is over? I can't say I've seen a lot of evidence to support this claim. What I can tell you is this. I used to be the ultimate consumer. I shopped like it was my second job. I've always been a teensy bit thrifty, but I've been known to splurge. My closet is home to a $550 Coach bag, a $220 pair of Guess over the knee boots, a $400 Betsey Johnson dress... I think you get the idea. When I lost my job in March of '09 that spending ceased. I am not even sure I know what fashion is anymore. And, what I can say is this... my spending may never return to where it was even if the money comes back.
Marketers need to realize that there are two groups of people now. Group 1 has been affected by the economy and group 2 has only watched.
Group 1 consists of people, or spouse's of people, who have actually lost their income. Group 1 may not have health insurance and have likely forgotten what their dentist even looks like. Filet mignon is no longer on their menu. Group 2, on the other hand, has retained their position in the workforce and hasn't actually felt the effects. They may know someone who is unemployed or they may have watched their best friend at the office be laid off, but as much compassion as they may have for these people, they can never truly comprehend what it feels like physically or emotionally.
So how does this pertain to marketers and big brands? Welcome to the new divided economy. Marketers must either choose between the groups or divide and conquer. Truth is, Group 1 may never come back. And if they do, it may be a very long time, even years, before the emotional turmoil of their present situation is a distant memory. Group 1 has formed a new way of life. New values, new money hoarding skills and a whole new strategy for getting what they need to survive.
Group 2, on the other hand, will probably be an easy win, as they have never really lost them. BUT, Group 2 has likely become accustomed to the deals and couponing that have become so prevalent (as they have had the funds to exploit and enjoy these discounts). Many chain restaurants now offer 2 dinners, an appetizer and a dessert for $15. The GAP has bombarded us with coupons and weekly discounts, positioning the brand almost at the level of Old Navy. Even airlines (think Jet Blue's unlimited ticket promotion) have joined in the discounting game.
Bottom line - it's a new economy, one who realizes that everything can be gone in the blink of an eye. Marketers will have to ween people from the discounts that they have so freely given. And, if they start weening now, they will lose. The vast majority of people are not ready to become the ultimate consumers they once were.
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Permalink Reply by Bob Knorpp on
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Like I said during our earlier conversation, Karen, the last point is particularly poignant because it is a product of our own doing as marketers. By treating all consumers equally during a recession, we degraded brand value and moved all consumer groups -- even those willing to keep spending at a certain level -- into a discount frame of mind. Now that recession is over, recovery becomes more difficult because of the reduced perception of brand value across the board.
Only the brands that continued to market against a branding building strategy during the recession are coming out on top. And I'm not talking about brand advertising. I'm talking about brand building -- the process of expanding mindshare, engaging hearts and creating ongoing relationships with customer groups. These folks who didn't continually discount and maybe swallowed some losses are best positioned to remain brands of value as the economy resuscitates.
As I said earlier, your thoughts were really inspired. Great insight.
Bob
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Permalink Reply by Karen Tabaka on
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You make a great point about the brands who sucked it up, stood their ground on pricing, and weathered out the storm. BUT, I can personally understand the desperation they felt to "stay afloat". Some of these businesses may not have had the financial strength to weather the economy and thus felt forced to lower their value with discounts and coupons. People have done the same with their own brand. A vast majority of the unemployed have taken monstrous steps backwards into positions that they are clearly over-qualified for, and for entry level salaries (or less) just to stay afloat. A supervisor at Banana Republic told me she had lawyers applying for retail positions. One could argue that personal brands have made catastrophic mistakes as well. Have these people degraded their own brand value? Now that the recession is "over" (ha!) can these people jump back into position? Or will they also be tasked with rebuilding?
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Permalink Reply by Bob Knorpp on
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That's always the dilemma of holding fast to branding efforts in tough times. I was trained as a direct marketer and I understand the need for ROI and driving sales. But I remember when the recession first started there were lots of cautionary tales from previous recessions regarding brands pulling back their spend and going toward discounting. EXACTLY what is happening now was what the experts were saying would happen. Brand value has been diminished and consumers become used to lowered expectations of what they should pay.
As for personal brands, there is a bit of that going on there as well. It's a little easier to hide that Banana Republic job on a resume, but there is a general difficulty in maintaining credibility when you settle for jobs that are beneath your training. You're forced to hide them in order to maintain stature. Unfortunately brands are unable to hide their discount trends.
Bob
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Permalink Reply by Marcus Fox on
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Over here in the UK, the nation has been split over the last couple of years. We are told that it's virtually a 50/50 split between public and private sector works. Which by the way is a slightly hgher percent than most "red" countries. During the first wave of the recession it was exclusively private sectors works who were hit, losing something like 5% of their workforce. Whilst the governement threw money at the public sector (a trend which started in the early Tony Blair years) and were "given" statements of job protection. This created a two-tier spending powerbase. Since the change in the government, much of this funding has been cut or planned to be cut and this has created a very interesting position, whereby NOBODY now feels safe and even police officers and teachers are being told their numbers will be cut.
To spend or not to spend is a huge debate at the moment and from a marketing perspective, I think the challenge will be to react fastest enough and with the right message.
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Permalink Reply by forcequit on -
It’s very likely that post-recession some will continue to treat all consumers equally; Being smarter about who we are directing our message to and understanding consumer circumstances better, is speaking the obvious, I guess. But when you’ve lost your job, the unemployment rate, for you personally at any rate, is 100%, regardless of what an Economist says. Brands with social intelligence that adapt to changing winds faster are much more likely to prosper.
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Permalink Reply by Bob Knorpp on
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Very good point. Knowing the customer is better than knowing the market. But it's unreasonable to expect when you have a million customers. The solution would seem to be to turn a select few into advocates and allow your brand to spread through the voice of friends, but then you lose control of your identity. So at a certain point you just have to find that balance between the two, regardless of the fact that certain people will be turned off by your messaging.
Wow! I think I have another Ad Age article in the making! ;)
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