How Businesses Should Interpret the Newest GDP Figure
Aug 28th, 2010 by DavidMitchel
On Friday, August 27th, a report was released that revised the 2nd quarter US Gross Domestic Product (GDP) figure. The report revised the figure downward, from 2.4% to 1.6%. This means that the US economy only grew at 1.6% between April-June 2010. While a growth rate of 1.6% is better than no growth at all or negative growth, it is still an unimpressive growth rate. It is a sign that the economy is slowing. Businesses need to be aware of economic indicators, as they provide crucial clues regarding the behavior of the target markets of their products.
Businesses that sell directly to consumers must know the pulse of their consumers. Right now, the consumer has a very weak pulse. In recent months, many pundits had talked about a recovery. Now, with negative economic information being released frequently, prominent economists are talking about the prospect of a double dip recession, as they consider the first recession to have occurred from late 2007-early 2009. It is difficult for many consumers to believe in this concept. Equity markets did rally from March 2009 until the first half of 2010, but the majority of consumers didn’t see their economic conditions improve during that time frame. The majority of consumers never really recovered from the onset of the recession in late 2007 & 2008. Unemployment increased while the equity markets gained, and the consumer only gauges their economic health by their levels of income.
How should businesses react to a weak and likely to be weakening consumer market for goods and services?
Since the consumer is weak, they are very price conscious. Pricing is likely to be the most significant factor in the marketing mix for many brands now. Price conscious consumers are looking for a tremendous price-value proposition. In this economy, there have been certain product categories that have shown growth despite commanding premium level prices. However, in other categories, deep discounts have been vital. No matter what level a business chooses to price their products at, it is vital that the consumer perceive value in the price point.
Product promotion is another important factor in the marketing mix. In this economy, many businesses have been looking to cut advertising spending significantly to save money. This is a fundamentally erroneous approach. Numerous studies of previous economic downturns have shown that brands that continued to advertise during a downturn emerged from a downturn much stronger. This should be a time for all brands to examine their media channel promotion strategy and select media channels that provide significant return on investment. It is possible that advertising spending may be cut in this process, but a company will still be engaging in brand building behavior. As always, it is important to select the right channels. The right channels are influenced by the product category, the budget, campaign objectives and the target market. The final criterion is the most important one as the target market needs to be aware of a brand and perceive it positively before deciding to purchase.
Navigating the waters of discouraging economic data is a challenge for all businesses, particularly those businesses that are consumer centric. However, using aspects of the marketing mix can provide remarkable competitive advantages that will enhance revenue and profitability.






