December 17, 2018

Five Signs That A Recession Is About To Overwhelm Your Business

It's not hard to detect trouble. In fact, you probably have already created a dashboard to determine when trouble is on the horizon. It's been my experience that there are four key signs that trouble is brewing ... read those below ... and read paragraph two (click here) where 50% of business leaders think a recession could be a month away (which likely means recession isn't a month away).


Sign #1:  Customer Acquisition performance is failing. This won't be a channel/tactic-specific challenge. You'll simply notice that it is much, much harder to acquire new customers at the same cost you used to be able to acquire customers at.


Sign #2:  As customer acquisition performance fails, somebody in your company demands that you generate more revenue from existing customers, pushing you toward expensive customer loyalty initiatives. This trend is being covered extensively by the trade industry, and that worries me.


Sign #3:  When customer acquisition becomes more expensive and loyalty initiatives prove too costly with minimal return, somebody in Finance or on your Merchandising Team will decide that all new items are going to be more expensive. This tactic "can" work ... yup ... it can ... but too often it doesn't work, and when it doesn't work customer acquisition is hurt even more (new customers find the assortment too expensive) and loyalty efforts are hurt (because any gains in loyalty work are offset by lower response to more expensive items). Again ... this tactic "can" work, but it requires Merchandising Brilliance. If you don't have Merchandising Brilliance, wade into the water very slowly.


Sign #4:  As 1/2/3 above all interact to create a swirling bowl of failure, Merchandise Productivity fails ACROSS THE BOARD. This is a key distinction ... when you have merchandising failures, some categories perform poorly while other categories perform average or above-average. This is not the signature of a recession. The signature of a recession includes across-the-board failure in all merchandising categories, all price points, and all customer segments.


Sign #5:  In response to 1/2/3 and in response to you showing the company that (4) is happening, your Marketing Team and/or Inventory Management Team decide to offer deep discounts coupled with frequent promotions.


You already measure much of this stuff ... so you know if a recession is coming or not. If you don't measure it, go read the book below and use the techniques in the book to identify if recession is coming your way.

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