A ‘depressed economy’ is an economy which experiences a prolonged period of recession, or a significant and prolonged downturn in the economy. Characteristics of an economic depression include declining business activities, falling prices, rising unemployment, increasing inventories, public fear and panic. In times of depression, consumers' confidence and investments decrease, causing the economy to shut down. The classic example of this occurred in the 1930s, when the Great Depression shook the global economy.
‘The Great Depression of 1929’ was one experienced by the United States of America. During this depression which was caused largely by wrong monetary policy, unemployment was 25% and wages (for those who still had jobs) fell 42%. Total US economic output fell from $103 to $55 billion and world plummeted 65% as measured in dollars. The ‘Great Depression’ as experienced by the United States lasted for about 10 years, and that was the last economic depression the country experienced until the mid-2008.
The global economic downturn in the mid-2008 pushed the United States into a recession, GDP growth contracted from -1.7% in the fourth quarter of 2008 to -0.2% in the second quarter of 2009 and later recovered the third quarter of 2009 to 0.4% , making this the deepest and longest downturn since the Great Depression.
Economic depressions will not last forever but how long it last will be determined by the quick identification of the depression and immediate control measures that are put in place. To help stabilize financial markets, the US Congress established a $700 billion Troubled Asset Relief Program (TARP) in October 2008. The government used some of these funds to purchase equity in US banks and other industrial corporations. In January 2009 the US Congress passed and President Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus to be used over 10 years - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover.
This goes to show that ‘failure is only failure when the one who failed repeats the same or similar mistake that caused the failure in the first place.’(Bukky Shonibare).
In the midst of depressions, businesses still have to survive despite its negative effects on the citizenry, the existence and continuity of businesses and the economy at large. Among others, these negative effects includes a reduction in revenue, profit and personal income, rising unemployment rate due to mass retrenchment, crime rate will amplify and thus resulting to insecurity in the economy.
While individuals will have to make so many lifestyle changes to survive in a depressed economy whether by cutting down costs, saving more, getting a job in a rather secured industry, or by developing other sources of income; businesses too must do the same. For wise business-owners, it is a time to re-strategize and re-position to ensure they survive the depressed environment they operate in.
Some business survival tips:
1. Reinvent your business: In reinventing ones business, one don't have to be a venture-backed high-tech company to reassess your business model. In fact, the smaller and leaner your business already is, the faster you can shift gears and zoom back into action. There is however a need to sit back and take a cold, hard look at your business strengths, weaknesses opportunities and threats in the possible markets. In order to do these, there is a need to analyze your existing sales and talk to prospective customer in order to determine
- What customers want and will pay for. What new products or services can be developed? What's the best way to deliver solutions to them? What's going to bring in the most profit?
2. Know your marketplace: For a business to thrive during a depression period there must be assurance that the product or service is needed at that time else there would be little or no market for the business. If the business is not part of an existing market, you need to be absolutely certain of who you are targeting as the risks are much higher when there is no known market especially for small businesses with fewer funds for advertisement and promotion. However, a highly innovative and new product and service can sometimes create their own section of the market if they are made and promoted well enough.
3. Analyze your customers: Identifying one’s target market may sound easy, but in a depressed economy your target market will shrink as fewer people can afford to buy. Thus, there is a need to take a close look at your customer segments, and make sure you understand why they purchase from you. Segmenting can be done in several ways. For instance, you can use volume of sales; type of customer, such as purchase location (retail/wholesale/internet); type of buyer (commercial/government/personal); or by buyer demographics (educated/family status/residence location).
Then you can analyze your various segments to determine what product/service features are important when customers make purchase decisions, which segment provides the best margins and/or greatest volume for your business and other identifying features.
4. Develop a marketing strategy: Having identified the need for your product and service (market) and knowing the target market (audience) that will patronize you so they can have a life-long experience of your USP and business edge; it is imperative that the following steps be considered in order to develop a proper marketing strategy:
- Describe your company's unique selling proposition (USP).
- Define your target market.
- Write down the benefits of your products or services.
- Describe how you will position your products or services.
- Define your marketing methods (Advertisement, Internet marketing, direct marketing, or public relations)
5. Have a Business Edge: When considering having a business edge over other competitors, there is a need to take into consideration those qualities that can give the business an edge over other competitors. It has to do with a lot of experience and deeper knowledge about the business and its process. Several changes may occur during the course of the business; e. g. change or update in products and services; or introduction of a new product or service; but a business’ edge will remain throughout the life of the company.
6. Identify your Unique Selling Point (USP): A business’ USP (also called Unique Selling Proposition) is that key factor that sets you and your business or you as an individual apart from your competitors. It could be the business’ area of specialization, location, bespoke customer service, range, brand, experience, price, guarantee (or warranty), or packaging of products and/or services. A business’ USP could be in one area, two or several; it is important that a business owner identifies its USP(s), make it strong, and focus on it. A business without a USP or a weak one will probably have to struggle to make its products and services attractive to customers in a depressed economy. It is however imperative to make use of the following strategies to uncover your USP and use it to power your sales:
- Put yourself in your customer's shoes.
- Know what motivates your customers' behaviour and buying decisions.
- Uncover the real reasons customers buy your product instead of a competitor's.
Bukky Shonibare is the CEO/Lead Consultant of 555 Consulting Limited, a management consulting firm envisioned to help enterprises increase productivity and attain world-class status, with focus on Business Development Services, NGO Management, Human Resource Management, Training & Development, and preparation of business documents.