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Global Meltdown, aka Where did all my money go??
By bear | November 4, 2008
Does anyone remember junk bonds in the 80s? A great securitised product based on high risk loan products with exorbitant interest rates, which had a very high return as long as Americans kept paying off their loans. Of course they didn’t, and the junk bond market collapse contributed heavily to the 80s recession, and the downfall of many major brokerages.
Sound slightly familiar? Of course this time around the products were high risk low interest-bearing products with no securitised value whatsoever, except they propped up an entire housing market, and the silly lenders who accelerated their own growth via poor credit decisions. Now both the market and the lenders are ruined, and recession again rears its head in the US.
Australian business is reeling too. A beer with some colleagues last week provided interesting facts – every single employer of my mates had started to “reduce headcount”. Large scale redundancies, a “getting rid of the fat” play. Media houses in Australia are in the same boat, with Fairfax, Telstra & PBL Media all letting staff go in recent times.
For us marketers this means a few key things. Firstly, we’re usually the first ones to get the chop when “down-sizing” occurs (see Telstra for example), which means we all start to feel a bit nervous. Secondly, consumer sales tend to go down during a recession, putting financial pressures on companies whose stocks are already getting pounded, and increasing pressure on sales & marketing teams to “do more with less”. Thirdly, advertising budgets get put on hold, recruitment freezes become the norm, and risk-aversion becomes the company mantra. All of these issues cripple an organisations ability to counter reduced sales and profitablity.
Therefore it is important that we marketeers work hard to ensure our businesses continue to build forward momentum. Engaging our customers gains importance, because whilst brand loyalty is dead, brand equity is still alive in the collective subconscious. Involving our customers in our business and product development gains greater importance (if possible!) as we need to fight for every sale in a tougher world.
For many companies, creating two-way conversations with their consumers to increase brand engagement is still considered innovation (and more so from an internal culture perspective). Innovation is risky, and often costly, and will be a hard pitch to nervous corporate decision makers. But for marketers to prove their worth in tough economic times, they will need to show measurable returns to the bottom line, and conservative thinking won’t cut it.
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