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Musings from a Marketer On the Economic Crisis

December 2008 Corporate

While I never lived through the Great Depression, I studied it.  If you are looking for parallels between then and now, there a very few.

When I was in college in the early 60s, I remember we studied, in economics, that was considered “full employment” was an unemployment rate of  7 percent.  The most dire predictions of the current situation is 8 percent unemployment.  Moreover, although corporate earnings are generally lower and forecasts are conservative if not pessimistic, it is not an across-the -board situation.  There are companies out there that are doing quite well.

What we have is a crisis of confidence.  Things we going too well for too long and everybody expected the shoes to drop, and the sub-prime mortgage debacle was all it seemed to take to unravel everything.

What does this all mean to the marketing environment both in the U.S. and globally.  The confidence problem means lower budgets, less advertising, fewer new employees, layoffs, etc.  This is the conventional wisdom and the normal knee-jerk reaction.

Opportunities from the Downturn

I suggest there are some very smart people out there poised to make a real killing.  Both in the financial and marketing environments, I believe there are great sums of money both in the U.S. and abroad that are poised to move into a grossly undervalued market – when they believe the right time is at hand.  In the marketing environment, the smart companies are going to use this period to make hay as well.  Economic slowdowns represent great opportunity to increase market shares.  Lack of demand for media means better prices, and advertisers can get a lot more mileage from their budgets.  They can also take advantage of opportunistic media buying opportunities.

Auto Industry Implications

The one serious problem that I see is the apparent willingness to hang the auto industry out to dry.  I do not believe the Obama Administration will let this happen.  Clearly, the auto industry needs a big dose of humility.  Coming to Washington for a handout via the corporate jet is pure stupidity.  However, Congress left the door open and simply asked for a plan.  Clearly this was a reasonable request.  It’s also important to bear in mind that there are a number of senators and representatives in Washington who believe the interests of their constituencies is to let Detroit fail.  These are the Southern states that have attracted the foreign car companies to set up plants there.  These plants employ non-union workers and thus the playing field with Michigan and Ohio is hardly level.

While it is easy to decry the labor constraints that Detroit feels.  The labor movement is part of the American fabric.  Eliminating the auto unions is like trying to put the toothpaste back into the tube.   Moreover, letting the auto industry fail would, indeed, be a disaster to this economy.  The unemployment shock plus the destruction of supply chains and the retail auto business would be devastating.  Moreover, who would play $20,000 to buy a car from a bankrupt company?

The Obama Administration will not let this happen.  But it becomes a wonderful opportunity for the Administration to demand energy efficiencies and green production advances.  In the long run, such efficiencies and advances will enable Detroit to better compete with the rest of the world.  Also I see that these non-union foreign car manufacturers in the South are also laying off workers.  Eventually, union organizers will enter the picture here as well.  Remember Norma Rae?

Not IF But WHEN

The big question is not IF the economy will recover but WHEN.  Here are some things to watch: (1) Inventories — when they get so low they will have to be replenished and that will give a big boost to manufacturing and employment; (2) The stock market – the stock market is a leading indicator of the economy six months to the future.  So, while housing, unemployment, confidence numbers may be ever more depressing, when you see in the midst of all this doom and gloom a resurgence in stock prices that will be the signal that the professional investment community sees an economic recovery six months in the future.



About the author

James T. Berger, Managing Editor of The Wiglaf Journal, through his Northbrook-based firm, James T. Berger/Market Strategies, offers a broad range of marketing communications, research and strategic planning consulting services. In addition, he provides expert services to intellectual property attorneys in the area of trademark infringement litigation. An adjunct professor of marketing at Roosevelt University, he previously has taught at Northwestern University, DePaul University, University of Illinois at Chicago and The Lake Forest Graduate School of Management. He holds degrees from the University of Michigan (BA), Northwestern University (MS) and the University of Chicago (MBA). Berger is an often-published free lance business writer who has developed more than 100 published articles in the last eight years. For more information, visit www.jamesberger.net or telephone him at (847) 328-9633.

James T. Berger
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