Making News
(October 2008)
The Bumpy Road from Failure, to Rescue, to Recovery
According to a USA Today/Gallup Poll prior to the financial storm during the past two weeks, 43 percent of voters felt that the state of the economy was the most important issue facing the 2008 presidential candidates. Following the economy in order of importance was the war in Iraq, energy and gas prices, health care, terrorism and other issues. Certainly today, the polls would likely continue to reflect an elevated focus on the economy without us even having to do the math.
And for good reason, with Germany moving swiftly over the weekend to guarantee all private bank accounts and French lender BNP Paribas SA performing a bailout of the Belgian bank and insurance giant, Fortis NV, the shockwaves have clearly moved around the globe. Bailouts are being pushed in Italy by the Prime Minister and European Union finance ministers are meeting to figure out how to place supports under a shaky banking system across the continent, evidence of just how deep this is going to go before stability begins to be regained. More is surely to follow.
Facing worldwide economic uncertainty, it seems a looming black cloud hangs over nearly every aspect of business and consumers. With the absolute disbelief by the general public that such a failure could even be possible again in the United States, let alone one that could impact the entire global economic system, positive economic news for the public, the markets, the business community, and no doubt the presidential candidates, is nowhere in sight.
Why not more answers? The negativity just kept rolling as Americans hung onto their seats while the leadership in Washington quibbled over how to begin to dig us out of the failures of all aspects of our financial fiber with a bailout bill that could be viewed similar to using a tuna can to get the water out of a sinking rowboat. Could we not have come up with a more positive spin on this “bailout” with all of the supposed genius in our great Capital? Must we all swallow the pill of the failure instead of the uplift of rescue from the very people to whom we entrusted our life’s savings and our children’s college tuition funds?
The next president will not only have to champion the revamping of our great nation’s economy and banking system with the help of the greatest financial minds available to him, but he will also have to rescue the hearts and confidence of the American people. He will be expected to provide a solemn yet positive course that can invigorate confidence and pride in a nation that is so great, yet desperately in need to remember what we have to offer to ourselves and to the rest of the world.
As the housing market maintains its uncertain outlook, unemployment rates continue to rise (with the latest report that the U.S. lost 159,000 jobs last month alone), energy costs remain high, and what was an unsteady banking industry reveals itself to be even less stable than we all thought, marketers need to look for fresh ways to talk value to their key audiences in order to sustain market share.
We are glad to have September in our rear-view mirrors, a period that produced the worst monthly loss for the S&P 500 in 6 years and $1 trillion of bailouts, rescues and intervention by Uncle Sam. The good news is that since 1990 October has been historically the best performing month for the market, up better than +2% total return on average. Let’s hope that history holds true and we begin that upward climb, even if ever so slight soon.
Consumer Spending
Consumer spending is down across the board. No surprise that it’s expected to remain tight with the potential for a holiday retail season predicted by some to be the worst since 1991. September sales at even high-end stores like Nordstrom (down 5.8 percent), Saks (down 3.7 percent), and those of staples Target (down .3 percent) and J.C. Penney (down 8.3 percent) dropped in September in the midst of a continuing spending decline. Increases were seen in September at Wal-Mart Stores, Costco and BJ’s, according to a poll by Thomson Reuters. These discounters have hit home with their long-standing cost/value proposition.
Adding value to every purchase and enhancing the shopping experience should be the focus of companies hoping to retain the price sensitive customer, which defines most of the American public today. One example of a company responding to cost-conscious consumers is Kroger, which is offering a 10-cent discount per gallon of gas with every 100 dollars spent on groceries. Jobing.Com out of California provides its employees with 500 dollars a month in free gas in exchange for turning their cars into rolling billboards promoting the company.
Even not-for-profits are collaborating to retain audiences. Old Sturbridge Village, a living history museum in Massachusetts offers one free adult ticket with every 30-dollar gas purchase at participating Gulf dealers to lure customers. In the meantime, many other luxury brands are moving toward improved online tactics to increase sales and drive revenue.
As reported in an article titled “Global Brands Adapt To Meet Changing Economic Climate” by MediaPost Publications, brands such as Louis Vuitton and BMW are keeping their marketing budgets intact, despite current economic affairs. Many are even boosting their online advertising efforts, proving that smart investments on the Web continue to generate sales and traffic during these slow economic times.
Housing Market Pains
With shrinking home values and a surplus of inventory at its highest levels since 1981, politicians in the upcoming election must also address housing market issues. According to a recent article published by US News and World Report, it now takes 6.3 months to sell a home compared to 4.3 months a year ago. As reported by ENR.Com, some banks have temporarily bowed out of financing commercial construction projects and most are turning down borrowers who aren’t “squeaky clean.”
On the potentially bright side of the equation here, homeowners are choosing to stay in their existing homes and are looking for ways to enhance these places of respite from the daily grind to make them more comfortable and functional for their families. This should continue to bolster the remodeling market as these homeowners also look for ways to add value to what is in many cases their largest investment and upside opportunity for the long run. Remember, although bad mortgages were a key factor that got us into this mess, most homeowners pay their mortgages and have no intention of defaulting.
On another positive note, people will always splurge for their families, particularly around the holidays. For all of us who have a product or service to sell, we must remember that consumers will first purchase what they need and select those brands that they perceive as offering them the very best value for their dollar. They will also afford themselves and their families a few luxuries as the holiday season approaches. These will be products and expenditures that connect with them on an emotional level and provide a positive experience for their families.
A Long Road Ahead
We are a resilient nation and although most financial specialists say that we have just started down the road to rescue and recovery for our economy and that it could be a very long time before stability and an upswing is near, I choose to take the well founded position that forward motion breeds more forward motion. If manufacturers and marketers keep their heads out of the sand and keep working to bring the best quality, value, and function to the American people while telling them why what we have to offer is a solid choice for their limited disposable income, we can hope to emerge from all of this a bit leaner but a lot more efficient and effective. Let none of us be naïve, this is going to be a very bumpy road, but we can recover and I believe be better for all of the ruts over which we will have traveled.
Have a comment or want to bounce around some ideas? Feel free to contact me at sk@kleberandassociates.com or comment on my blog at www.kleber-marketing.com.
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