Paying attention to business is one of the major benefits of a recession. Ford figured it out. And so has Starbucks by bringing back the founding CEO, closing nearly 1,000 marginal stores and — most significantly — introducing their own instant coffee. This could be a brilliant move. While proudly passing up their $4 cup of coffee, we take the instant stuff home and keep a little Starbucks in our lives.
But the recession has worn on so long, we're tired of hearing so much bad news. Yet, pushing all that aside misses the point and so do all the layoffs and foreclosures. Dwelling on the real but negative skews our perspective: we are so preoccupied with getting through the recession, we can easily fail to learn from the experience. We're like students who are so focused on graduating they miss the education.
To help avoid missing our recession education, here are six clarifying lessons from the current state of the economy.
1. Cutting prices can kill business. In a recent Yankelovich survey, 70% of the respondents assume a brand that lowers its prices during a recession is already overpriced. Further, 62% believe the products are old, perhaps ready to expire or are about to be revamped.
There's more. In the same survey, 65% assume that leaving prices unchanged is a sign that the brand is popular, while the same percentage believes it indicates that the product is already a good value.
In the food business, McDonalds, Burger King, Chili's, Applebee's and others recognize the price-cutting problem by creating new value menus that don't compete with their regular offerings. Some car manufacturers are responding with the same strategy by introducing new, lower-priced models such as the Nissan Cube and the Kia Soul.
2. Figure out that tough is normal. Referring to the devastation of the recession, we hear people say, "We didn't need this." Of course, we didn't need all the job losses, dashed personal plans and families forgoing basic necessities.
What we need is an attention-getting wake up call. Whether you agree with it or not, that's what the President gave the banks and the auto industry.
The lesson in all this is simply that tough is normal. Just ask the people of Fargo, ND. about tough. They didn't whine or whimper when the Red River reached a crest at more than 40 feet. They filled and stacked more than three million sandbags in record time. They won some and lost some and after the river began receding, the plain talking, gutsy mayor, Dennis Walaker, gave the city a new challenge, "Our word for the day is restore and recharge." That's the right memo!
Tough is normal and it's time to get used to it.
3. Get the right vision. In Epic of America, James Truslow Adams explored what it was that gave America its prominence. As David Kamp, writing in Vanity Fair notes, "What Adams came up with was a construct he called 'that American dream of a better, richer, and happier life for all our citizens of every rank.'" He wrote those words in 1931, the heart of the Great Depression.
We all know someone from a dirt-poor family, who gained a college education and later looked back and said, "How the hell did that ever happen." It happened because someone had the right vision.
4. Give customers a reason to have confidence in you. GM's "value-added" strategy for clearing out its obese inventory included a 100,000-mile warranty, a plan to make up to nine monthly car payment of up to $500 each if you lose your job and throw in its Onstar emergency system for a year. Unfortunately, GM has an unparalleled credibility crisis: consumers don't believe them.
If GM would ever consider leveling with consumers, they might inspire confidence and sell more cars. The pitch might go something like this: "Look, folks, we're in a jam [We're all aware of this]. We've got hundreds of thousands of cars sitting around the country on dealer lots [We've seen dozens of pictures of acres of cars] and we need to sell them fast because we need the cash [Now, we're listening]. We can't give them away [Makes sense] but we're going to do everything to give you more value than ever for your dollar" [Seems reasonable]. Come in and let's talk about it" [Call to action].