“In the current economic climate…”

Michael Alan Hamlin

Posted on February 26, 2009

And other carpetbag marketing trends

Last Saturday, I found myself in Rosario, Batangas where I enjoyed an excellent Filipino lunch and great conversation. One of the other guests present makes a living operating sari-sari stores in Bicol. I asked him if he felt the effects of the economic crisis on his business, which is a baseline monitor of economic well-being for most Filipinos. Initially, his response was that Filipinos in export industries and information technology are experiencing the negative effects of the crisis, with demand drying up and jobs disappearing.

He then thoughtfully gazed into the distance and said, “But we feel it in the sari-sari retail industry, too.” This friendly gentleman, while pouring me another glass of an impressive Shiraz, related to me and others gathered around a small table in a bahay kubo hut the story of one of his regular customers, an attractive couple whose lifestyle is supported in part by siblings working abroad.

“They are my regular customers,” he explained, “and I give them credit. They pay their bills every week when their siblings send money home.” My new friend explained that the siblings rotate this responsibility, and the couple has been doing so well as a result that they send their three children to expensive private schools. “Then,” the story continued, “I realized my customers had run up P8,000 on their account, and had stopped paying regularly. You know, that’s a large amount for a sari-sari store,” the informal retailer told us.

He proceeded to relate how the handsome couple with three children in private schools had suffered a setback when two of their siblings in the United States lost their jobs recently. As a result, their remittance income dropped by two thirds, and the young family had fallen on hard times. When my fellow guest brought the arrears to the attention of the wife, she confessed that she didn’t have the money to pay him. “In that case, I won’t be able to extend credit to you anymore,” he told her. In response, the desperate mother wailed, “Oh please, please help us.”

While he is sympathetic, the well-intentioned retailer still needs to make a living, and can’t afford to extend credit indefinitely. Aside from his predicament with the young couple, which must find new sources of income, the sari-sari store operator has other immediate issues to consider. Specifically, how to keep people buying and paying despite the negative impact of the financial crisis. And, how to deal with the new reality that customers who continue to buy and pay are buying less.

These issues are the same issues businesses of all sizes are facing. As I thought about this sad little tale, it occurred to me that virtually every advertisement and promotional item I receive in this difficult time refers in some way to the economic crisis. Most attempt to leverage the crisis to induce spending. For example, “invest in leadership development training now to be ready to take advantage of the rebound when it starts.” This is what I call, “Eat, or you won’t be around to enjoy the rebound!” approach to crisis marketing. Although disingenuous, it is widely prevalent.

Another good example is brand consultants that advise struggling businesses to invest in building and promoting their brands in a crisis. Because consumers want to spend wisely in a crisis, they tend to favor branded products that they are convinced will deliver value. While this is actually true, it is a desperate brand consultant that tries to get a weak brand to enhance its attributes and visibility when revenue growth is in the cellar. It’s too late. Another example is technology companies and consultants who encourage potential clients to invest because technology will help them manage their dwindling revenues better and squeeze out a profit.

Then, there is the carpetbagger approach to crisis marketing. This is where an expert has the secrets to survival and success. I received one such communication just as I was sitting down to draft this column. It starts, predictably, “Small and medium businesses face huge challenges in the current economic climate. Successfully marketing services has become increasingly difficult as budgets are slashed but intelligent use of resources can still produce effective results.”

For just $249, this consultant will sell you a paper, “Tech Marketing for SMBs” to “provide the data you need to develop successfully in the current economic climate.” Impressed? Imagine the potential return on that investment!

Yes, consumers and businesses are desperate, and looking for ways to keep the gravy flowing, or at least to keep eating and sending the kids to private school. These examples seem to suggest that there are at least some gullible enough to go for the bait. I certainly can’t claim to have the answers for addressing these difficult times, but it seems to me that focusing on the fundamentals of doing business – innovation, productivity, efficiency, taking care of customers, and leading – is the key to survival.

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