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On Target (Winter 2009)

I don’t think there’s any doubt about it, 2009 is going to be a very difficult year in business for just about everyone. In the 25 years that I’ve been in the real workforce, I haven’t seen anything like it. In fact, I’d say that my business life has provided me a relatively cushy ride for the past two and a half decades. It seemed like everything was always up, up up. Oh sure, there were little hiccups along the way, and we can’t forget the downturn that took place after 9/11, but after the initial fear subsided everyone knew that we were coming back from that. This feels a little different.

When you have a recession coupled with companies hoarding cash because they aren’t sure the banks will lend them any money, everyone gets a little jumpy, waits a little longer to pull the trigger, pays a little slower and generally reduces what they perceive to be nonessential expenses and people – which further trickles down and fans the flames of fear and apprehension.

I think that deep down we all know “this too shall pass.” It’s time to break out of our paralysis and figure out what to do about it until things get back to normal – and they will. The sky is not falling; it’s just cloudy outside. So what can we do to see through the clouds?

Well, first assuming you agree with the general assumptions laid out above, I think the first thing to do is determine what tactics and sales for this market will be in the doldrums for 2009 and which will provide opportunity. Let’s start with the doldrums and grow to an optimistic crescendo from there.

If a company is laying people off, hoarding cash and cutting expenses because they’re afraid they won’t be able to borrow, they’re going to start with those expenses they feel won’t provide an immediate return on their investment. Having said that, I think it’s safe to assume promotional products sales will suffer in the short term. Companies won’t give away as much, even if their corporate name is on the item. Gifting in general will suffer as well. It’s great to give top customers gifts throughout the year to let them know you’re thinking about them, but the fact that you’re calling every week to find out if you’re getting your order should alert them to how much you care. Pillow gifts for meetings I believe will suffer for the same reasons. Now, don’t get me wrong – there will still be a multi-billion-dollar promotional products and corporate gift business, but for now it just won’t be a growing business. If your business is rooted in any of the abovementioned areas, you might want to think about other areas of opportunity.

Now let’s get optimistic.

I think customer and dealer loyalty programs will show some growth. Why? Because in a recession your client’s competitors might drastically cut margins to increase their market share, and that can be countered by a loyalty strategy that keeps your client’s customers coming back. McDonald’s does it. Pepsi does it. American Express does it. Why shouldn’t the mid-size companies in your territory be doing it too?

We’ve recently fielded a lot of questions about using incentives to get customers to pay faster. I don’t know what these types of programs are called, but I do know that companies have been asking us how to deal with this challenge. Here’s an example: One company had $5 million of outstandings for the quarter and everyone was paying a month slower than usual. The bank wasn’t lending him any money, so his company was in the precarious position of soon not being able to cover their monthly expenses. His sales were okay, but his clients were just paying slower. He was inquiring about how to structure a program that used incentives to get his customers to pay quicker. He reasoned that if he could increase payment by 15%, that would be $750,000 more he would have to pay the company’s bills. We think incentives can help, and at the right price.

We’ve also been getting a lot of calls about referral programs. I think that’s another sector that should be on the rise. Companies might not have the dollars to run the same type of advertising campaign they have in the past, but they might be inclined to offer an incentive to employees and customers who send some business their way. It’s essentially a “pay-for-success” marketing strategy, and companies that need new leads will be taking a closer look at ways to get those leads in a way that only pays out when that objective is met. If employees didn’t get their raises this year, they might be more receptive to a $100 referral bonus (in merchandise or gift cards, of course) and take it more seriously. I think customers will be more receptive as well. They already feel bad that they’ve had to cut purchases, so they might be inclined to passing along a referral in return for a nice watch. (Remember, that customer also got fewer holiday gifts this year, so he’s already feeling a little let down.) In this environment, companies are looking for programs with variable costs based on results. Only incentive programs provide that advantage.

And while we’re on the topic of advertising, I think ad agencies are going to be a target-rich environment. They’re being pressured by their clients to show a definitive ROI on their advertising strategy – and that means measurably increasing sales. I believe a lot of agencies will be receptive to offering incentives as part of their overall ad campaign. We’ve had inquires in this area as well – they just need help understanding how to do it.

Finally, I would also learn all I can about the alternative energy business, because there will be more public and private dollars flowing into such projects – and they’re going to be looking for effective marketing strategies that can jumpstart this new sector of the economy.

There’s no doubt about it, this is going to be a year many of us will not soon forget. But I believe with all my heart that there are opportunities out there. We just might have to look in different places and offer different solutions to take advantage of those opportunities.

Good luck, and here’s hoping the sun begins to shine again real soon.

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