Recession – Scarred Marketers Grapple With Post-Traumatic Stress
It is not entirely clear when the economic battle–a.k.a. the Great Recession–of the 21st century actually began.
- I consider 2008 to be the year of “great value destruction.”
- Many marketers are still aggressively promoting their products. It seems their mind-set lags behind market realities.
- Time-limited promotions become meaningless for consumers who learn that the next, better offer is right around the corner.
Some point to Oct. 9, 2007, when the Dow Jones Industrial Average peaked with a closing price of 14,164. Others believe it was on Sept. 15, 2008, when the financial services firm Lehman Brothers filed for Chapter 11 bankruptcy protection. The National Bureau of Economic Research says it all began in December 2007.
There is, however, a widespread consensus that the economic battle ended in June 2009, when the economy started to expand again. But a lot happened before that turning point. Business was very tough, no matter what industry you were in. Given widespread uncertainty about the future, consumer spending was way down, hitting virtually all retailers. And as so often when we have to deal with extreme circumstances, marketers took extreme measures.
That’s why I consider 2008 to be the year of “great value destruction.”
Retail prices tumbled, previously sacred brand values where thrown out, and America went on sale. Nobody paid retail anymore. “Even our sales are on sale,” one major retailer boldly proclaimed in an advertisement. Marketers were in an apocalyptic mood. They no longer worried about tomorrow’s brand equity, but only about today’s cash flow. In a way, they became cash collectors.
Today, the Dow Jones has not only recovered, but is at an all-time high. The gross domestic product continues to climb steadily, up 5% in the past two quarters alone. The Consumer Confidence Index is at its highest level since August 2007, and the National Retail Federation reported that retail sales increased by 4% for the 2014 holiday season.
Life is good again. The economy is strong, and the future promising.
So I find it remarkable that many marketers are still aggressively promoting their products. It seems their mind-set lags behind market realities.
An indicator of this nervousness can be seen in their 2014 Black Friday retail campaigns. The holiday discount season started much earlier than in previous years, both in stores and online. I saw the first “Black Friday Deals” at the beginning of November, three weeks ahead of the actual discount day. Retailers tried to push consumers with “hurry, sale ends soon” offers, only to come out the day after with a new promotion at an even deeper discount. Numerous online retailers prolonged their Black Friday deals over and over again, well past the Nov. 28 deadline.
Extending time-limited sales promotions is now a standard operational procedure for many.
The promotional pressure does not come from consumers. It is driven by retailers that continue to use tactics similar to the dark days of 2007/08. During the past holiday season, many marketers voluntarily gave margin away while, at the same time, conditioning the consumer that paying full retail is a distant memory of the past.
While the recession and, with it, the fight for so many businesses to survive is over, some marketers have failed to transition back to healthy marketing strategies that focus on building long-term growth and sustainable customer loyalty. It seems that they are suffering from post-traumatic stress.
Even a few weeks into 2015, our inboxes are still flooded with “sale ends tomorrow” promotions and “sales extended” pushes. These marketing tactics can easily get out of hand, ending in a downward spiral.
Time-limited promotions become meaningless for consumers who learn that the next, better offer is right around the corner.
More importantly, it tells the consumer that it is no longer about the retailer, the brand, the product, or the service. It is only about the price. Valuable products are turned into simple commodities.
It is time to return to solid brand building and move on from the recession marketing strategies. To all the CMOs. I have good news: The battle is over.
Jan-Patrick Schmitz President & CEO
About the author: Jan-Patrick Schmitz is the founder of Muirbury & Co. He is a thought leader in the consumer space with extensive experience in international brand management. He has been a guest lecturer at a number of universities including Harvard Business School, George Washington University, New York University and the Fashion Institute of Technology.