by Pete Hayes, Principal at Chief Outsiders
Everyone “knows” the US economy is in a recession, or so it seems. Consumers feel the pain of collapsed 401k’s, higher fuel costs, and elevated food prices, so would that not be enough to declare a recession? And ought my business be hunkering down to ride this out, people ask themselves.
In today’s turbulent economy, the average consumer and CEOs are more likely to react to news headlines and stock market trends than market insights. As a result, corporate decision-makers might completely abandon a core strategy or delay critical execution tactics based on a sick feeling in the gut.
But a look at the hard data will alleviate these concerns to a considerable degree. For example, a recent article by ITR Economics argued that inflation is currently peaking, disinflation (a slowing pace of inflation) is around the corner, and the economy—while cooling — is not in a recession proper and is not likely to enter one. Among the factors that show that disinflation is near are the normalizing oil price, a US Personal Consumption Expenditures Price Index (excluding food and energy) that is dropping, and supply chain pressures that are easing because of slowing demand.
Treasury Secretary Janet Yellen does not see the conditions present for a recession either. Indeed, there has been a weakening of macroeconomic numbers. Still, any economy that creates more than 500,000 jobs monthly (numbers from July 2022) is not quite close to a recessionary condition.
Three Recommendations for Corporate Leadership
What to make of these seemingly contradictory markers? First, since caution is warranted concerning any predictions of a recession and continuous inflation, marketers need to be prudent with price increases. Indeed there is nothing wrong with a concern for short-term margin protection, but as the Purchasing Managers Index (PMI) rate of change has already turned negative (by more than -10%), falling demand can be expected soon. Anticipating the coming disinflation through price setting will make a company a more attractive alternative than more expensive competitors.
Companies should also pay close attention to the labor situation. There are fewer than 0.5 people available to fill any given job opening. Businesses need to invest in the employees they have (through retention policies and rewards) while at the same time looking for new ways to automate relevant human resource processes. Firms should also be willing to source flexible or part-time help through the gig economy. There are now temp or fractional labor resources in almost every position and level of business, from engineering types to the executive suite.
Businesses also need to monitor inventory levels as supply chain pressure wanes and demand in many sectors softens. Buying power has shifted significantly in many sectors in the current post-stimulus environment. It is crucial to avoid getting caught off guard. If possible, businesses should target sectors that are still growing. For example, warehouse construction opportunities are multiplying while office construction numbers decline. If companies can pivot their goods and services to such an adjacent sector, they’ll have a chance to grow.
Hunker Down or Pursue Growth?
ITR’s forecasts show that, while slowing, most sectors of the economy are not expected to experience negative growth (formally indicating a recession) in this business cycle. However, some honest questions are in order. If this is true for a given CEO’s sector, what does it signify? How should businesses align marketing strategy and execution tactics to capitalize on opportunities rather than simply hunkering down? Finally, leadership must consider how competitors are responding. Perhaps as they begin to take their foot off the gas pedal, CEOs can instead capture market share by making some calculated moves in the following areas:
Businesses must be open to adjusting the markets they serve. Perhaps traditional markets are not growing. Nevertheless, there may be adjacent markets CEOs can quickly pivot to and exploit. Consider this a time to move upmarket with more sophisticated offerings or move downmarket to reach a larger population of buyers.
The digitization of the buyer journey continues unabated in most sectors. Companies should consider accelerating their digital plans where they have the means, making it easier for buyers to find and buy from them. E-commerce isn’t just for consumer businesses. Find new ways to streamline the sales approach, focusing the sales team’s higher touch resources on the highest value and potential customers.
Why customers buy products and services is subject to change in most industries. Where buyers’ “problems to solve” have changed, companies would do well to update their messaging to reflect the accurate and current value they provide today.
Demand generation tactics likely need updating as well. Continuous performance monitoring of promotional campaigns offers insights on what needs to be cut instead of those tactics companies should expand. Similarly, it is helpful to modernize marketing and sales technology platforms. Note that many opportunities here often lie in the middle of the sales funnel. Don’t spend more money filling the top of the funnel (with promotional programs, etc.) without mining the middle of it for higher conversion rates.
Finally, and most importantly, CEOs must ask themselves whether they have exemplary marketing leadership to make the required decisions, as mentioned earlier. Companies need leaders who can bring a market-based perspective to the C-suite table, help prioritize the actions, and then efficiently lead the implementation of the growth initiatives.
Buffering the “Sugar High” Crash
Stimulus payments (among other factors) have caused inflation to rise considerably. However, there is a light at the end of the tunnel, with inflation expected to decrease significantly soon. Therefore, companies should not jump the gun, going into crisis mode because of a dreaded recession that might not materialize. They should instead continue to invest in growth strategies because there are — in the current economy — still plenty of opportunities for most companies in most industries.
If the causes of our current predicament can be compared to a “sugar high,” then ingesting some solid food by making fresh strategic assessments and investments is the best way forward. Daring to continue investing in growth will help businesses both weather the slowdown and position themselves for further growth as companies operate through the threat of hyperinflation and interest rate adjustments.
Pete Hayes is Principal at Chief Outsiders, the nation’s leading executive-as-a-service, fractional CMO firm. Pete co-directs a tribe of world-class, executive-as-a-service marketers to accelerate growth for clients with infusions of instant senior marketing talent. He is also the co-author of “The Growth Gears.”