Maximizing Sales in an Economic Downturn
July 5th, 2008
Jeremy Gislason asked:
The news media would have you believe the current economic downturn or recession is the end of the world as we know it. Parallels are already being drawn to the Great Depression, while some would argue that the economic woes of the 70s and 80s would be a closer analogy. For those involved in business, marketing, and sales, especially online, it is important you play down or ignore the politics of the recession and focus on the facts. The truth is many people see opportunity where others see only crisis.
In 2007, the size of the United States economy as measured in terms of the Gross Domestic Product or GDP was in excess of $13.8 trillion. Even if the size of the economy declines by two percent (which was the average total contraction during the ten downturns since the end of the second World War we are still talking about an economy in excess of $13.5 trillion. People are still buying goods and services. Just because times have gotten harder does not mean people have stopped living altogether.
People are simply looking for ways to save money or improve their lives while other parts of their life become harder to deal with. Food prices, interest rates, and manufactured goods have all seen sharp price increases since the beginning of the downturn. This provides you with opportunities which may not have previously been there, as consumers seek out more affordable alternatives to products or services they took for granted in good times.
Online business in particular may see an increase in traffic if they effectively manage their strategies during the downturn. People are traveling less, seeking to save money on gas. They also are looking to save money on sales tax and to comparison shop for the best deal. All these things add up to give online businesses a tremendous opportunity to increase sales.
Attracting First-Time Customers with Loss Leaders
Since people are looking for bargains in a bad economy, a loss leader can be a classic but effective method. A loss leader is simply selling a good or service for little to no profit in order to attract customers in the hopes they will purchase your other, more profitable products along with your loss leader. This strategy has been employed for years by retailers as a means to get people in the store by adverting their weekly specials (or loss leaders) in the weekend newspapers. If you are an online business, you can employ this strategy in your advertising and marketing. Target your loss leader for keywords that relate to it and while your customers are purchasing it offer them the other products and services you have available.
Price Testing
Price testing, as its name would suggest, is the experimentation with different prices to determine at what price point your product is most profitable. An economic downturn is a good time to test this as many businesses will slash prices to the bare minimum and profitability to near zero. Others will raise prices as they become desperate try to increase revenue and price themselves out of business.
Drawing a balance between these two extremes is the key to success. By maximizing your sales and profitability in a bad economy, you will be able to grow your business when your competitor’s are shrinking theirs. This will position your business for rapid growth once the downturn ends. It is important to remember that all economic downturns eventually end. While we may not know when, we do know unquestionably that it WILL.
Better Targeting Your Customer Base
You focus on developing better targeting techniques in your marketing, but it is even more critical in a bad economy. Most businesses will have to cut costs somewhere, but ideally it should be done by trimming the fat of your operation, not by reducing sales and marketing. One way to “trim the fat” is to improve and streamline your marketing. Focus on keywords and marketing techniques which bring you the most success. Now is also a good time to experiment with low-cost marketing techniques such as creative offers, viral marketing, or competing in niches with less competition.
Do Not Fear the Worst
To say that future is uncertain may be the worst cliché ever written. However, there is no guarantee that this recession will not be the worst in a generation. While few people wish to say the dreaded “d” word, a depression could very well be on the horizon though for now it still seems unlikely. But the economy does not end even in a depression or bad recession.
As stated above, people will still continue to live. They will still need things. A transition to a barter economy is not in the future anytime soon. So be cautious and avoid big gambles that could fall flat if the economy continues to worsen, but do not let worry consume you.
For instance, the worst case scenario for Internet marketers would be the total collapse of Google AdWords and online advertising as a whole. But even in this bleak scenario there is potential. Such an event would essentially “correct” Google. We would return to a time when web pages were ranked by legitimate popularity and not by optimization.
Where does that leave online marketers? With a prime opportunity if they tough it out and don’t hang their career up. With so much competition departed, scoring a high search listing would become easier and cheaper than it has been in years. And people will continue to search the web, this is not going to change so long as the web as we know it exists, people will use search engines to make sense of it.
The above was only one example of how simply outlasting your competition can reap big rewards. If you make any changes to your business or sales strategy, make it simply a goal of survival. However, avoid the hunkering down, massive cost-cutting survival mode that many businesses are entering. This will only leave you in a weakened position when things begin to turn around. Instead, cut costs where you are able, but continue to lay the groundwork for growth when things do begin to improve.
The news media would have you believe the current economic downturn or recession is the end of the world as we know it. Parallels are already being drawn to the Great Depression, while some would argue that the economic woes of the 70s and 80s would be a closer analogy. For those involved in business, marketing, and sales, especially online, it is important you play down or ignore the politics of the recession and focus on the facts. The truth is many people see opportunity where others see only crisis.
In 2007, the size of the United States economy as measured in terms of the Gross Domestic Product or GDP was in excess of $13.8 trillion. Even if the size of the economy declines by two percent (which was the average total contraction during the ten downturns since the end of the second World War we are still talking about an economy in excess of $13.5 trillion. People are still buying goods and services. Just because times have gotten harder does not mean people have stopped living altogether.
People are simply looking for ways to save money or improve their lives while other parts of their life become harder to deal with. Food prices, interest rates, and manufactured goods have all seen sharp price increases since the beginning of the downturn. This provides you with opportunities which may not have previously been there, as consumers seek out more affordable alternatives to products or services they took for granted in good times.
Online business in particular may see an increase in traffic if they effectively manage their strategies during the downturn. People are traveling less, seeking to save money on gas. They also are looking to save money on sales tax and to comparison shop for the best deal. All these things add up to give online businesses a tremendous opportunity to increase sales.
Attracting First-Time Customers with Loss Leaders
Since people are looking for bargains in a bad economy, a loss leader can be a classic but effective method. A loss leader is simply selling a good or service for little to no profit in order to attract customers in the hopes they will purchase your other, more profitable products along with your loss leader. This strategy has been employed for years by retailers as a means to get people in the store by adverting their weekly specials (or loss leaders) in the weekend newspapers. If you are an online business, you can employ this strategy in your advertising and marketing. Target your loss leader for keywords that relate to it and while your customers are purchasing it offer them the other products and services you have available.
Price Testing
Price testing, as its name would suggest, is the experimentation with different prices to determine at what price point your product is most profitable. An economic downturn is a good time to test this as many businesses will slash prices to the bare minimum and profitability to near zero. Others will raise prices as they become desperate try to increase revenue and price themselves out of business.
Drawing a balance between these two extremes is the key to success. By maximizing your sales and profitability in a bad economy, you will be able to grow your business when your competitor’s are shrinking theirs. This will position your business for rapid growth once the downturn ends. It is important to remember that all economic downturns eventually end. While we may not know when, we do know unquestionably that it WILL.
Better Targeting Your Customer Base
You focus on developing better targeting techniques in your marketing, but it is even more critical in a bad economy. Most businesses will have to cut costs somewhere, but ideally it should be done by trimming the fat of your operation, not by reducing sales and marketing. One way to “trim the fat” is to improve and streamline your marketing. Focus on keywords and marketing techniques which bring you the most success. Now is also a good time to experiment with low-cost marketing techniques such as creative offers, viral marketing, or competing in niches with less competition.
Do Not Fear the Worst
To say that future is uncertain may be the worst cliché ever written. However, there is no guarantee that this recession will not be the worst in a generation. While few people wish to say the dreaded “d” word, a depression could very well be on the horizon though for now it still seems unlikely. But the economy does not end even in a depression or bad recession.
As stated above, people will still continue to live. They will still need things. A transition to a barter economy is not in the future anytime soon. So be cautious and avoid big gambles that could fall flat if the economy continues to worsen, but do not let worry consume you.
For instance, the worst case scenario for Internet marketers would be the total collapse of Google AdWords and online advertising as a whole. But even in this bleak scenario there is potential. Such an event would essentially “correct” Google. We would return to a time when web pages were ranked by legitimate popularity and not by optimization.
Where does that leave online marketers? With a prime opportunity if they tough it out and don’t hang their career up. With so much competition departed, scoring a high search listing would become easier and cheaper than it has been in years. And people will continue to search the web, this is not going to change so long as the web as we know it exists, people will use search engines to make sense of it.
The above was only one example of how simply outlasting your competition can reap big rewards. If you make any changes to your business or sales strategy, make it simply a goal of survival. However, avoid the hunkering down, massive cost-cutting survival mode that many businesses are entering. This will only leave you in a weakened position when things begin to turn around. Instead, cut costs where you are able, but continue to lay the groundwork for growth when things do begin to improve.
