With the U.S. economy experiencing major challenges amidst bank failures and Wall Street woes, what’s next for marketing? Do we go back to business as usual once we have a bipartisan agreement in place? Or are things going to change for us?
The system is so complicated and perhaps so broken, that no one really knows what will become of our economy, and the global economy, which is greatly affected by what transpires in the U.S. I have zero economics background, so like many others, I am vulnerable to blog and news chatter. Lately, I’m hearing very pesimistic predictions, saying that we’re headed for long-term economic disaster, no matter what gets done in the short term. The fallout will continue, they say, more banks will go under, and the FDIC itself is at risk, with a deposit insurance fund that stands at 1.19% of insured deposits.
And the car companies are next. Famed economics maven, Gary S. Becker says on the Becker-Posner Blog, “All the American auto companies are now asking for handouts too since they cannot compete against Japanese, Korean, and German carmakers. They will probably get these subsidies, even though these American companies have been badly managed.”
I consider myself an optimist, but with all this doom and gloom discussion, are we burying our heads in the sand if we go about business as usual? How will this change what we do as marketers? What will we need to do to adapt to the changing environment? How will we address a reduction in consumerism, cutback in marketing budgets, and/or marketing staff lay-offs?
What do you think? Are you changing your marketing strategies?
Elaine,
As I said in my piece, I am urging my clients (and am taking my own advice) to be more aggressive in our marketing efforts. As others worry and hide, those who work even harder to get noticed will be the winners at the end of the day.
Elaine, everything is cyclical, although it should be noted that we have ourselves in quite the pickle as our economy will need to continue to unwind the excesses from previous years. That said, the US is still the largest economy in the world, has most innovative workforce on earth, and is teaming with really intelligent people (and lots of them). Do we have competitors who are getting stronger (BRICs)–absolutely. But I believe there is much room for optimism.
It’s going to hurt for awhile til the healing is over. Then we’ll get to rip off that band-aid.
Lewis, it looks like we had the same idea for our posts today. Under usual downturn cycles, I agree with you that this is the time to stand out. However, are we being naive to think it’s just cyclical, as Paul states?
I want to be optimistic, believe me, it’s in my make-up. I am also being affected by those around me who say that this is only the beginning. Some say that America, like the Roman Empire, is on the beginning of its downward spiral, and that poor management, greed, and a lack of regulation is setting this in motion.
Some even predict a run on the banks and eventual anarchy. Are they delusional? Are we headed toward another Depression? Or should I stop listening to these soothsayers?
@Elain and @Lewis: Couldn’t agree more, and thanks for the great articles.
You’re right Elaine; it’s becoming increasingly difficult to stay optimistic these days (or at least ignore all of the negative predictions). I think that the most successful will be those who see the present reality for what it is and find ways to turn it into an opportunity. As Seth Godin said on Friday, “Inc. magazine reports that a huge percentage of companies in this year’s Inc. 500 were founded within months of 9/11. Talk about uncertain times.”
As I said in response to Lewis’ post, yours also rang especially true for me, as the startup that I work for (Simplaris) is concentrated on helping small businesses operate efficiently, grow and succeed regardless of economic conditions. Historically, when the economy is doing poorly and unemployment is high, more people turn to self-employment as an option, either to supplement their regular income, spouse’s income, retirement savings, or otherwise. Anyway, catering to micro/hobby businesses is just one example of carving a niche that recognizes the present reality. Thanks again.
Having lived through a number of economic downturns during my career, I do believe it is cyclical. In 1981, I moved to Atlanta from Philadelphia. It was a time when home interest rates were 19%. I was able to get a 36-month ARM at 13%. I could not sell my home in Philly very quickly and had two mortgages for several months. It was almost impossible to get money or afford it for a business. Now my mortgage is 6%.
I must say that the one thing I believe helped move us out of the 1981 problem was the election of Ronald Reagan. Now I am not a Republican or Democrat. In addition, Reagan was not perfect, but he brought change and more importantly, he motivated the people to believe in the US and in our ability. The last time I had seen that was John Kennedy focused us on getting to the moon. Reagan focused on freedom.
I am hoping that the next president will focus us on oil independence and alternative energy. Of all the countries in the world, we have the ability to solve this issue and it will focus the country in a positive way.
Meanwhile we will have some pain and I agree that companies should use this as an opportunity to move into more effective and efficient messaging, namely social networking and media marketing. What we now is great leadership for the country, for our companies and for marketers.
Honestly, I don’t think “optimism” or “pessimism” is the right way to deal with this situation. Having worked in the mortgage industry, I can say with near certainty that the major lenders brought this on themselves. As early as 2005, home mortgage insiders were already predicting a significant downturn in the housing market. Lenders like B of A, Wells Fargo, and Wamu, instead of preparing for the cyclical economic slowdown, panicked, and in a desperate effort to keep the mortgage market alive, lowered their credit standards just to get people in the door. The federal government encouraged this behavior, offering education to “underprivileged” groups on how to qualify for mortgages they couldn’t even afford. Ultimately, lenders giving $200,000+ mortgages to every $18,000/yr janitor with a forged Mexican martricula card, no social security number, and no credit score, just set the market up for a bigger failure. When the teaser rates on these mortgages ended, and people started to foreclose, lenders were left holding worthless paper.
However, people shouldn’t be so concerned about this situation. It was bound to happen. The economy will not grind to a halt, and we will not all be bankrupt. This is an opportunity for solvent, well managed companies to step in and fill the void left by these imploding lenders. The most dangerous thing for the market is if people react to this situation emotionally with pessimism and fear. Emotional reactions are what lead to poor decisions, such as the $700 billion bail out plan, designed to rescue poorly managed corporations with tax money. Do we really think that if we save these companies now, their management will somehow improve? That’s absurd. The only way to eliminate the possibility of the same mistakes being repeated is if we allow these corporations to fail and be replaced with better managed, better structured ones. As for the “average” citizen, the opportunities did not dry up, they are just harder to find and require a bit more work. As a nation, we need to ask ourselves: “Are we still a country of entrepreneurs or have we become another “give me” society?” The answer to that question will have far more impact on our economic future than anything the stock market does tomorrow.
Rob, thanks for sharing your company’s strategy.
Harry, I agree that alternative energy is the way to go, not only for the environmental benefits, but to take a lead business position. It will also help the west gain independence from those oil-producing nations that are not our best fans.
Stephen, in principle, I agree with you about letting the chips fall as they may and allowing bad managers to take the fall. But, I worry that the long-tern fallout will harm average small business owners and regular people with savings and retirement funds. And they don’t deserve that for their hard work.