The Shift of Making Money to Saving Money
Founder + Partner + CEO
Published Tuesday, June 9, 2020
From economic prosperity to an economic downturn, there is a fundamental change in focus from the future to the present. Due to economic uncertainty, there is a psychological marketing shift in business owners (like myself) from making money to saving money. We have all heard that when times get tough the first cuts in a budget are made in marketing expenses. Which really isn’t true. Sure, marketing efforts get questioned and scrutinized, but people still invest in marketing – it’s what is said in the marketing and sales messages that carry the power.
In times of economic prosperity, we focus on growing our business and being more profitable tomorrow. In an economic downturn, we shift our mindset to grow our savings, “protect” our business, protect ourselves, and surviving day-to-day.
In periods of prosperity, marketers and sales reps forget that rising sales are NOT caused by clever ads, appealing products, and unique sales pitches – but they are caused by disposable income and feeling confident that the purchases made won’t put them in a bad spot but rather are an investment for the future.
When the market turns, so does the consumer’s confidence which causes less focus on the future and more focus on surviving the present. Market segmentations such as “over 40 customers” or “middle-class customers” become less relevant. Psychological segmentation is much more powerful to consider as owners weigh the pros and cons of how purchases/investments will impact them immediately.
This idea was briefly discussed in a virtual conference I attended the other day on the topic of marketing in a pandemic. They didn’t go into much detail, but it intrigued me enough to explore the idea further. When I did, I found a lot of enlightening information.
When the economy is great and businesses are doing well, selling, making money then marketing is geared toward the same thought process. Messages and products are sold to support a return on investment: “Buy this and it will help you increase your sales, make you more profitable, and gain you more customers.”
During recessions, business owners set stricter priorities and reduce spending. They cut costs, reduce prices, and postpone new investments. In short, their mindset shifts from prosperity for tomorrow to protection for today. Of course, they want to make money and be successful, but marketing messages promoting future success have less power. Messages need to shift to: “Use this product to accomplish the same result at a lower cost, using this service will save time by taking three steps out of the process, and/or buying these products will help you keep customers.”
Why has the messaging that catches our attention suddenly changed? I always assumed people will respond to ideas, services, and products that help them be successful, but after I studied this, I took a step back and realized I have personally responded differently. Our business at ScreenBroidery is doing very well and we have no reason for a fundamental shift. The fear of uncertainty has caused me to question long term security. I did cut expenses, increased cash reserves, and paid down debt – all of which are business protecting behaviors because my shift has evolved from future growth to dealing with the current economic challenges.
The economic uncertainty has also caused me to fine-tune our strategies and processes. I have been more acceptable to ideas that help us save money and protect our business rather than ideas that help us make more money. Don’t get me wrong, I have received and thought of a number of ideas on how we can make more money, but I find myself questioning and scrutinizing those ideas much more than I did two months ago. Now that I understand this, I am capable of making stronger decisions and work to not lose sight of the future – because ultimately that is where we want to be.