Now that the recession is over and the long recovery is upon us, business is going forward, albeit slowly and certainly not painlessly. Uncertainty still looms and a few wrong moves by Congress and this administration could easily send us back to recessionary times.
Even if the economy improves continuously from here on out, there are long term holdover effects of the worst economic times since the Great Depression. I have identified a definitive pattern change in buyer behavior. The fact that fewer people are buying and they purchase less when they do buy doesn't come as any shock, but the shift in the motivating factors for buying is significant.
There have always been three motivating factors for buying: greed, logic, and fear. Sadly, logic is the weakest, and one only needs to examine commercials from the recent election to understand that fear is the most powerful of the three.
Greed was the driving force for the last two decades until the financial crisis turned everything upside down. Up until then, people had plenty of resources and felt secure that business would be stable or growing, so they focused on buying what they wanted with little concern. Today, their concerns have increased so they buy less from greed.
Fear is the driving force behind what could be referred to as "the new austerity." Consumers and businesses alike have built-in fear about parting with their money. They have three fears that will keep them from spending today.
Fear of Waste
In this economy, every dollar counts. Guilt or embarrassment sets in from spending on something that doesn't work or collects dust on the shelf from lack of use.
Fear of Extravagance
Excess is no longer the fad for most people and few want to be seen as ostentatious when so many are hurting. Companies have greatly reduced the way they spend on visible items, such as parties and travel, so as not to upset their shareholders. Some are promoting their frugality as a way of showing that their margins are slim enough to justify their pricing.
Fear of Poverty
Hoarding resources is the order of the day in an uncertain economy. No one wants to deplete the bank account when another downturn may be right around the corner. Buyers are keeping their bank balances as flush as possible to make sure they can weather the unforeseen cash issues that may be ahead.
As one who experienced the repercussions of the financial crisis personally, I experience these three fears. It's tough to get me to buy today unless I have a strong need causing me pain. The looming uncertainty of European finance, the Fiscal Cliff, and political gridlock are sure to keep fear a major factor in the buying process.
You can overcome the New Austerity with the right approach. Here are three tips for increasing sales in a tenuous business climate.
1. Focus on Empathy
When buyers are in fear mode a strong sales approach will only put them in a defensive posture. Acknowledge their fear first. See it from their perspective. Create products and services that bring value and communicate how your offering will solve their pain in a compelling way.
2. Establish a Niche
It's much harder to create broad appeal in an uncertain market. A commodity approach will only lead to price pressure. Find a need and focus on filling it in a deep and meaningful way. The perceived value may attract fewer buyers but those that buy will pay more for something truly useful and appropriate for their needs.
3. Make Buying Fun
Too much of what's going on around us is depressing and painful. Why create a Pavlovian reaction that associates purchase with pain? Find a way to entertain your buyers as they spend with you so they look forward to swiping that card or writing that check.
Each of these remedies requires creativity, consistency, and commitment beyond the typical approach of previous decades. Ultimately the challenge for a business today is providing an offering that is overall more compelling than the established fears. Unless a company appeals to a more powerful fear than waste, extravagance or poverty, a prospect won't likely part with cash and no sale will occur. But for the company who executes, they will be best positioned for the day when this new austerity subsides and greed kicks in once more.