Escaping the Vicious Cycle of Recession

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Author: Brent Durell

There was a certain point in the American economy when there was this general feeling of elation as most businesses rode in a wave of unabated growth. Businesses expanded and profits soared to levels that were beyond imagination. However, this bull of an economy suddenly stopped because of the recession that every major industry is confronted with.

The United States-based National Bureau of Economic Research (NBER), a research organization dedicated to promoting a greater understanding of how the economy works, defines economic recession as: "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales." We are told of stories about factories shutting down, companies downsizing, personal income shrinking, and the worst is, there are no immediate signs of recovery.

Take the example of the ubiquitous corner stores that was once part of a thriving industry. The big grocery chains as well as smaller independent chains are both going through a period of very low client turn-out. Despite aggressive marketing campaigns made obvious by the volume of orders from poster printing companies, people are just not going to part with their hard earned dollars. Or if they are, they become more practical in the sense that they lean towards the most essential household items such as food items. Because people are not buying, sales fell to a historical low while inventories piled up in stockrooms. Unable to sustain its target profit margin, these groceries, big and small, resorted to measures to quickly fix the problem. However myopic the strategies may seem, these groceries just have to cut its losses by laying off some of its personnel. Retrenchment has always been the quick and dirty option. This strategy however, compounds the problem because as workers are laid off, unemployment rose to levels that would, on a longer basis, affect consumption. This becomes a trap and soon, the economy enters into the vicious cycle of recession.

The ultimate question in both consumers' and the industries' mind is how they can get out of this trap? How can people and businesses survive the difficult times?

One, business owners must evaluate their customers' ability to defy the economic downturn. In more simplistic terms, business owners must find ways to monitor and analyze their clients' spending patterns. They must try to understand the decision making process in each of their customers' minds. By knowing this, it would give business owners an indication of how they can convince consumers to start spending.

Based on this assessment, business owners can then proceed to the second step which is to redesign customer offerings. These offerings must be able to encourage customers to spend amidst the difficult times.

Along with the redesigned customer offering is a rethinking of marketing collaterals like print posters, brochures, catalogs. These marketing collaterals must be convincing enough to stimulate consumer spending even on items which are less likely to be bought during these times like non essential items. The value of these collaterals lie on their ability to not only attract customers back to the shops but also to persuade them that this situation is temporary and that in the long run, everything will be alright. This message is indeed very difficult considering that you are working on a very limited space as that of the print posters.

Finally, companies must be able to recalibrate their efforts to create artificial demand to stimulate spending. Companies can do this by refocusing and looking at the people who consume it rather than be oriented on the product itself. The main point here is that people buy the product and not the other way around.