Marketing in a Recession


by Colin Bettin | Dec 12, 2012

There  has  never  been  a  more  important  time  in  the last  70  years  to  look  seriously  at  marketing. Even in good times, it is  always  a  challenge to win sales, but today, in current  trading condition  it is harder and more important than ever.

So, perhaps we have arrived at a time when businesses need marketers more than ever before?

In theory, if a business makes an outstanding product or provides a great service, customers  will  come flocking, largely through word of mouth.

Unfortunately, in practice this is rarely the case. It is highly likely that a business will not be alone in their marketplace and therefore there is always a need to ensure that their message, their product and/or their service stands out from the competition. Under  current  worldwide  recessionary conditions  this  has  become  doubly  important  because  there  is  a  fundamental  requirement  to increase market share in order to maintain sales levels and thus profitability.

Meanwhile the Internet has turned traditional marketing on its head.  Over recent years the ways in which businesses need to communicate their message has also changed and will continue to do so increasingly fast.  Many are finding that their tried and tested marketing methods are beginning to be less effective than previously, perhaps due to shrinking markets, perhaps due to newer marketing methods now employed by competitors, or perhaps by both.

Of  course,  every  business  today  needs  to  view  their  performance  in the light of the greater world economy. With limited growth in many worldwide economies and an on-going financial crisis within the Eurozone coming on the back of the 2008 Credit Crunch, many people are now comparing the current situation with that of the depression of the 1930s.

Where will the current economic crisis take us? Can it get worse and seriously affect worldwide trade with individual firms facing   increasing  difficulties as business confidence increasingly evaporates? Whatever the future holds, it is clear that currently leading economists do not have an exact answer to these questions.

Lessons from the 1930's


Businesses That Thrived During the Great Depression

Even without the Wall Street Crash in 1929 and the knock-on effect that it had upon other Bourses around  the  world,  the  1930s  would  have  seen  difficult  trading  conditions.    This  period,  often referred  to  as  the  Great  Depression  (or  Great  Slump),  was  an  international  disaster  during  which very few economists and businessmen truly understood its precise cause.

In hindsight it is now  clear to see  that  at the time  the old and  traditional  industries,  like rail, steel and  textiles  had  already  reached  their  production  zenith. They were unable to sustain further growth and they were beginning to falter:

Domestic railway construction in both Europe and North America had long since peaked. Although by this period car production had nowhere near reached its peak, in 1931 demand for  new  cars  plummeted  with  three-quarters  of  a  million  fewer  cars  being  built  than  the number  that  were  scrapped  or  taken  off  the  road  because  people  could  not  afford  to  run them.

This helped to exasperate an over-production of oil that was glutting the market, and it helped to create an over-supply in the iron & steel industries. Additionally, agricultural, which has always been cyclical, collapsed into a period of overproduction and falling prices.

Old   economic   solutions   failed   to   resolve   the problems;   capitalism and the business cycle seemed broken. Some argued that capitalism had reached its mature phase and further growth that had fuelled it during the previous one hundred years was no longer possible.

Many economists now see the 1930s as a period when   capitalism   had   to   readjust   and   prepare itself  for  its   next  phase   -  a  transition  from  a manufacturing  to  a  consumer  based  economy. The  new  areas  of  growth  were  to  come  from armaments,   consumer   products,   electrical   and domestic appliances, medical care, recreation  and travel (especially air travel)  but the irony is that whilst the consumer economy of the post Second World War period was being born, most people in the  1930s  were  too  poor  to  notice  or  take  advantage. This led to a temporary stagnant world economy that made life miserable for millions.

A  further  contributory  factor  to  the  Great  Depression  was  the  level  of  debt  that  many  European countries had as a result of the First World War. This destabilized many European economies as they tried to rebuild. Britain had less debt than most because their war effort had largely been financed through  the  sales  of  foreign  assets  but  this  reduced  British  foreign  exchange  earnings  leaving  the economy  increasingly  dependent  upon  exports  and  thus  more  vulnerable  to  downturns  in  world markets.

But   wartime   disruption   to   trade   and   the loss of merchant   shipping   had   also   permanently   eroded. Britain's  international  trade  with  exports  falling  to about   80%   of   their   pre-war   levels   as   overseas customers  were  lost for       the  traditional,  old economy  items  that  Britain  depended  upon  selling like    textiles, shipbuilding,  steel and coal. Additionally,  Coal  contracts, for  example  from  the South  Wales  coalfields,  were  also  signed  away  in the  Treaty of Versailles to German  producers to help Germany pay for war reparations.

In fact, the situation in Britain was slightly different to many other parts of the world like, most notably, the USA.  British economic output had already fallen by 25% between 1918 and 1921 and was not to recover to previous levels until near the start of the Second World War.  Arguably, Britain was already in a slump which it was to suffer for twenty- one years beginning in 1918 so, relatively, UK economic output only declined mildly during the early years of the Great Depression.

New industries like the motor and electrical industries did   start   to   emerge   during   this   period   but   British products  were  not  generally  sufficiently  advanced  to compete  in  world  markets  so  producers  were  inclined to  concentrate  on  the  home  market. Media  was  the other new industry of the day, but a major part - Radio -   was   commercially   suffocated   in   Britain as it was entirely  restricted  to  a  state-owned  monopoly  called the BBC.

The stock-market crash of 1929 never caused the Great Depression, it signalled its start and can be viewed in many respects like the collapse of Northern Rock and then, more importantly 12 months later, by the even more spectacular collapse of Lehman Brothers in 2008.  None of them created the ensuing  recession  or  depression  that  followed,  but  they  did  enhance  the  difficulties  -  a  lack  of liquidity and investor confidence which compounded and further frustrated the possibility of growth.

Other circumstances surrounding the Wall Street Crash also sound rather familiar to us today. Claims of  economic  and fiscal  mismanagement  by  governments in the 1920s plus large quantities  of  debt combined to  make it  difficult for many  European  countries  like Germany  to  trade their way out of debt.   Initial actions by some central banks, notably the Federal Reserve, led to easy credit fuelling speculation while unregulated stock and securities practices undermined bank solvency as company valuations  rose  far  higher  than  their  real  worth  leading  to  the  bursting  of  the  bubble  in  the  Wall Street Crash.

About Author Colin Bettin

Colin has help thousands of people worldwide get started in very successful online businesses. Get a copy of his free report on" How to start and profit from your own Internet business" at http://www.greyacademy.com

 

About Chia-Li Chien

Chia-Li Chien Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY!” Succession Strategies for Women Entrepreneurs. She is Chief Strategist of Value Growth Institute dedicated to helping private business owners increase the value of their firms. She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her blog and newsletter was named a top small business resource by the New York Times “You’re the Boss” blog.
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