Columns

What not to do in a recession

Apr 09 issue

It’s so easy to get things wrong, writes Chris Ingram.

I like the optimist who pointed out that, even if 2009 turns out as bad as many predict, it will still be the third best year we’ve ever had (measured in terms of GDP). However, it is a recession that is deeper than anyone under 75 years old has ever experienced and this is having a huge effect on the way people think.

Generalisations are extremely dangerous in this climate, but nevertheless, it is safe to say that nearly everyone now is either hugely price- or value-conscious. The psyche of the nation has altered as we now believe it’s better to save our pennies than spend willy-nilly. Conspicuous consumption is overwhelmingly seen as bad taste, and even those who are still wealthy enjoy finding a good deal in almost anything and then proudly telling their friends about it.

So far, so obvious, yet it’s surprising how some are responding to the situation. Some panic, others overreact, while some decide the game is up completely and head straight toward the cliffs.

There’s no better example of demonstrating a complete lack of composure than the government. With Peter Mandelson back in the fold as the smooth-talking business secretary, a new initiative seems to be hitting the headlines every day. All of them are remarkable for being badly thought out and never followed through.

Interest rate cuts is another area where reason appears to have gone out the window. The last 1.5-point reduction has deeply damaged those with savings, who will now spend less while providing no benefit to those who need to borrow since the banks are hanging on to the money.

Customer disservice
Coming back to earth, a small menswear chain I use was, at first, not hit by the recession at all, but now it has bitten they have responded by reducing their range of traditional, quality goods by 30 per cent and replacing them with “budget” ranges. They argued that they can get in suits at ‘only five to six weeks’ notice’ when I popped in for my big ‘ready for spring shop’. So I went up the road, rediscovered a competitor’s shop and bought 90 per cent of what I needed there. Now my regular shop keeps ringing me to tell me they have got the stock in – too late.

In the meantime, an independent menswear shop nearby has given up stocking the quality, middle-of-the-road clothing like Timberland and Gant and has replaced it with much cheaper and garish ranges. In its panic, it has destroyed its brand values. It will be a minor miracle if it survives the year. In a separate sector, at a big chain of premium-priced hairdressers/beauticians, the toilets have been ‘Out of Order’ for several weeks – only they haven’t. Apparently, they have decided to economise by not cleaning the loos: the staff can still use them, but they are out-of-bounds to customers. D’uh! How is that good customer service?

Penny pinching
A top-price chauffeur drive service that I use recently hit me with what I felt was a disproportionately expensive charge for a very short local trip.

When I complained, the owner explained that getting the driver to me made the job unprofitable to him even at that apparently high price. He grudgingly reduced the bill then rang later saying it would be better if I found someone else to do the small jobs on which he couldn’t make money. The owner seems blissfully unaware that he has introduced one of his biggest clients to a competitor.

Different mentality
On the other hand, there are others who I can only assume have not realised there is a recession or credit crunch.

Yesterday, I came across an advert by JPMorgan saying it wanted to look after my money. It made no effort to tell me how well it would do the job, but more fundamentally, it gave me not one reason why I should trust them with my money. After months of revelations in the financial services industry about toxic debts, nasty surprises, meaningless reassurances and pathetic corporate governance, it would have been nice for them to have at least acknowledged the problems. Have they and their advertising agency been in a coma for a year?

My wife and I go to the theatre a lot, so we often have pre-theatre dinners. Last month, we had a glass of wine each, a starter and a main course, a bottle of mineral water and coffee at a hotel in Covent Garden. So we were by no means splashing out, but the bill came to £95 for two of us.

We can afford to pay, but they have surely missed the fundamental change in the psyche of customers, rich and poor in this climate. Meanwhile, many of their competitors, including the top restaurants, are being highly creative in the way they reduce costs to provide dramatically improved value.

Finally, in the B2B sector, only this week, the owner of a digital business was complaining to me how clients were expressing great interest in his service, but never coming to a decision.

It transpired that his projects were nearly all big-ticket items – not only inviting the involvement of the procurement department, but also inviting the client to delay.

He had missed the point that no one gets fired for delaying or postponing expenditure in a recession. He’d also failed to create a “lite” version of his service or a ‘little and often’ approach to encourage early engagement with the client and to slip under procurement’s radar screen.

Ultimately, those entrepreneurs who get through this will be the ones who think that little bit smarter than everyone else.


Editor's View Business Bulletin Trailblazers Business Tools Finance Expansion Strategy Leadership Flotation Exits Columns Enterprise News Deal Listings Backchat	Columns What not to do in a recession Apr 09 issue It’s so easy to get things wrong, writes Chris Ingram. I like the optimist who pointed out that, even if 2009 turns out as bad as many predict, it will still be the third best year we’ve ever had (measured in terms of GDP). However, it is a recession that is deeper than anyone under 75 years old has ever experienced and this is having a huge effect on the way people think. Generalisations are extremely dangerous in this climate, but nevertheless, it is safe to say that nearly everyone now is either hugely price- or value-conscious. The psyche of the nation has altered as we now believe it’s better to save our pennies than spend willy-nilly. Conspicuous consumption is overwhelmingly seen as bad taste, and even those who are still wealthy enjoy finding a good deal in almost anything and then proudly telling their friends about it. So far, so obvious, yet it’s surprising how some are responding to the situation. Some panic, others overreact, while some decide the game is up completely and head straight toward the cliffs. There’s no better example of demonstrating a complete lack of composure than the government. With Peter Mandelson back in the fold as the smooth-talking business secretary, a new initiative seems to be hitting the headlines every day. All of them are remarkable for being badly thought out and never followed through. Interest rate cuts is another area where reason appears to have gone out the window. The last 1.5-point reduction has deeply damaged those with savings, who will now spend less while providing no benefit to those who need to borrow since the banks are hanging on to the money. Customer disservice Coming back to earth, a small menswear chain I use was, at first, not hit by the recession at all, but now it has bitten they have responded by reducing their range of traditional, quality goods by 30 per cent and replacing them with “budget” ranges. They argued that they can get in suits at ‘only five to six weeks’ notice’ when I popped in for my big ‘ready for spring shop’. So I went up the road, rediscovered a competitor’s shop and bought 90 per cent of what I needed there. Now my regular shop keeps ringing me to tell me they have got the stock in – too late. In the meantime, an independent menswear shop nearby has given up stocking the quality, middle-of-the-road clothing like Timberland and Gant and has replaced it with much cheaper and garish ranges. In its panic, it has destroyed its brand values. It will be a minor miracle if it survives the year. In a separate sector, at a big chain of premium-priced hairdressers/beauticians, the toilets have been ‘Out of Order’ for several weeks – only they haven’t. Apparently, they have decided to economise by not cleaning the loos: the staff can still use them, but they are out-of-bounds to customers. D’uh! How is that good customer service? Penny pinching A top-price chauffeur drive service that I use recently hit me with what I felt was a disproportionately expensive charge for a very short local trip. When I complained, the owner explained that getting the driver to me made the job unprofitable to him even at that apparently high price. He grudgingly reduced the bill then rang later saying it would be better if I found someone else to do the small jobs on which he couldn’t make money. The owner seems blissfully unaware that he has introduced one of his biggest clients to a competitor. Different mentality On the other hand, there are others who I can only assume have not realised there is a recession or credit crunch. Yesterday, I came across an advert by JPMorgan saying it wanted to look after my money. It made no effort to tell me how well it would do the job, but more fundamentally, it gave me not one reason why I should trust them with my money. After months of revelations in the financial services industry about toxic debts, nasty surprises, meaningless reassurances and pathetic corporate governance, it would have been nice for them to have at least acknowledged the problems. Have they and their advertising agency been in a coma for a year? My wife and I go to the theatre a lot, so we often have pre-theatre dinners. Last month, we had a glass of wine each, a starter and a main course, a bottle of mineral water and coffee at a hotel in Covent Garden. So we were by no means splashing out, but the bill came to £95 for two of us. We can afford to pay, but they have surely missed the fundamental change in the psyche of customers, rich and poor in this climate. Meanwhile, many of their competitors, including the top restaurants, are being highly creative in the way they reduce costs to provide dramatically improved value. Finally, in the B2B sector, only this week, the owner of a digital business was complaining to me how clients were expressing great interest in his service, but never coming to a decision. It transpired that his projects were nearly all big-ticket items – not only inviting the involvement of the procurement department, but also inviting the client to delay. He had missed the point that no one gets fired for delaying or postponing expenditure in a recession. He’d also failed to create a “lite” version of his service or a ‘little and often’ approach to encourage early engagement with the client and to slip under procurement’s radar screen. Ultimately, those entrepreneurs who get through this will be the ones who think that little bit smarter than everyone else.