An Economist Uncovers A New Market Trend: The Rise of the DIY Consumer-Entrepreneur.

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[postintro]This article continues the occasional series from Professor Raushan Gross on The Institutions Of Entrepreneurship. Entrepreneurship is a powerful pathway to innovation, growth, prosperity, and a better life for all. Its emergence and thriving are not automatic; it requires enabling institutions. Professor Gross will analyze and explain the institutional supports required for entrepreneurship to play its role in elevating society to the highest levels of achievement.[/postintro]

Marginal and well-meaning small businesses are leaving the marketplace in droves during the COVID economy. Many consumers want to patronize these businesses, but the current economic situation calls for consumers to adjust and make trade-offs in their consumption patterns. The inability of small businesses to offer services and products due to COVID may well lead consumers to take on a new role in the marketplace – as consumer-entrepreneur.

The economic situation poses new realities regarding how the COVID transformation has and will affect consumers’ thinking about service and product acquisitions in the long run. The marketplace may shift as an unintended consequence of consumers’ changed attitudes. Yes, there are digital options, but there is an array of services that are not in a digitized format, especially some service-oriented acquisitions such as hairstyles and cuts, dental work, cosmetics, vehicle maintenance, and the like. The products and or services that consumers have historically received from small businesses in the past will, in many cases, be no longer be available. These market changes must alter consumer actions regarding product and service acquisitions in a far-reaching way that we have yet to see.

The immediate effects of the COVID economy are small business closures and the pivot to online acquisition of economic goods and digital services. However, we often do not consider the long-run effects that are not yet visible based on the change in customers’ behavior as they decide how to adjust to the fact that fewer options are available. To this point, Thomas Sowell once said that people are not blocks of wood, they react to changes in ways never intended.

The DIY entrepreneur-consumer uses their own human capital, skills, resources, and networks through the use of social and digital platforms to bring to market their creations.  Simply, the consumer-entrepreneur is an individual who produces the end product or service themselves and sells their products to other consumers in a consumer-to-consumer marketplace. Not that all DIY options are the best or worst, but it is a manifestation given the consumers’ choices under the COVID market phenomena. Simply, people respond to changes in the market.

Many consumers have experienced a market transition in which doing projects themselves – to produce products and services which they would have had to search for and find in the marketplace – has its advantages,. While many small business owners experienced the adverse effects of the COVID economy on the existing marketplace, consumers have found ways of doing things themselves and providing their services to others in an emerging consumer-to-consumer marketplace – C2C. The visible effect of COVID is fewer and fewer small business providers in the marketplace, but the invisible secondary effect is that this dissipation creates a consumer-entrepreneurial culture. Consumer to Consumer (C2C) is a marketplace ecosystem where individual consumers sell to and buy from other consumers.

There is no doubt that the horn of plenty for at-home consumption via digital products and platforms has fulfilled want-satisfaction, but there are some services where consumers must take part in their acquisition. Surely consumers can order most products online and download digital products and some digital services, but what about the services where the acquiring consumer must play an active part in its consumption? People would love to have dental work performed virtually, it would save the pain of a real visit, but this is not a service that one can accomplish (DIY) at home. Another example: I cannot get a hair styled or cut virtually, but I can do it myself in the comfort of my own home. I cannot get my car oil changed if my mechanic closes his doors. I guess I can do it myself.

If we look past the immediate benefits of our digitized consumption and think about the secondary effects of digital consumption, there is a significant additional array of consumers’ choices, particularly their choice to DIY and engage in entrepreneurship. Whether consumer-entrepreneurship is good or not so good, we do not know. Optimistically speaking, individuals who never thought of DIY-ing themselves and becoming a consumer-entrepreneur can now reap the benefits of the digital marketplace.

The simple fact is that if my mechanic closes his shop, I will have to maintain my vehicle myself. If my barber closes his business, I will have to style and cut my hair myself, which will not look the best, but the alternative is untenable. The short-run visible effects are the number of technological platforms that will allow consumers to DIY and e-commerce platforms to engage in consumer-to-consumer exchanges for their want-satisfaction, leading to an increasing number of consumer-entrepreneurs. The long-run effect is that consumers will have a new role in the future market economy which we have not intended – the DIY consumer-entrepreneur.

In the long-run, small businesses decrease their market presence, allowing more consumers to become more productive in satisfying their own wants and those of others, which creates a robust (C2C) marketplace. The immediate effect will be to show that consumers are creative and can be entrepreneurial. In the long-run, will consumers make these timely trade-offs between their leisure and production and overcome the disutility of their labor to DIY their services and produce goods for themselves and others in the (C2C) marketplace? Only time will tell if the COVID economic impact has a lasting effect on consumers’ ability and willingness to increase consumer-entrepreneurship.

 

Raushan Gross, Ph.D. is Associate Professor of Business Management at Pfeiffer University.

Unsure Of Your Direction In These Turbulent Times? Entrepreneurship Can Provide All The Answers You Need.

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2020 has been a strange year. My friend Ben always asks me, “Is the world crazy enough for you today?”  He knows I nurture the entrepreneurial spirit and he likes to challenge me: there’s too much uncertainty in 2020 even for those who typically embrace it, which is a good definition of entrepreneurs.

But, in fact, entrepreneurship is the answer in crazy times. Here are several reasons why.

Entrepreneurs are independent.

In times of turbulence, whether economic or political, global, national or local, many people can get confused. They’re not sure what to think, and they find it difficult to sort through competing claims or conflicting evidence. They look for the reassurance of someone else’s opinion to latch onto.

That’s not the case with entrepreneurs. They are independent thinkers. They rigorously seek cause-and-effect where it can be found, but they are also keenly aware that complex systems – when shocked with a pandemic, a disputed election, civil unrest, zero and even negative interest rates, significant changes in shopping and travel habits – can exhibit unpredictable and unstable emergent properties.

Entrepreneurs apply their own judgment based on the information that’s available to them and the insight that’s unique to them; they make a decision; and then they test it against reality by implementing it and adapting based on the results that come back. Independent thinkers are society’s best resource amidst turmoil.

Entrepreneurs are non-ideological.

It sometimes appears that we are suffering through a clash of ideologies, whether social or political or economic. Ideologies tend to be rigid and unrelenting, and those who hold one see opponents in anyone who holds another. Ideologies are not useful to entrepreneurs, and so they don’t include them in their assembly of resources. Ideological rigidity doesn’t mix with the pragmatism and adaptiveness that are keys to entrepreneurial thriving.

A non-ideological world sounds very attractive right now.

Entrepreneurs have no time for identity politics and political correctness.

Entrepreneurs are typically pursuing a finite goal with a finite amount of resources. They need the best people they can recruit to join their team, they need clarity of communication and a shared mission. The last thing in the world they have any time for is worrying about the political correctness of a choice or of a statement. They’ll listen to legitimate market preferences of course, but they won’t be distracted by meaningless noise. entrepreneurs don’t lie bout equality or unity. They assemble diverse teams – where the diversity comes from complementary competencies not divisive demographic distinctions – and they judge on passion for the task, performance, and results. 

Entrepreneurs are non-compliant.

A consequence of the pandemic is that a portion of the population has been beaten down into a state of compliance by authorities wielding mandates. Compliance is undesirable behavior when it is viewed through the entrepreneurial lens of innovation, betterment and economic growth.

We’re all better off when there is non-compliance: when Uber refuses to comply with the mandates n favor of taxis, or when AirBnB refuses to comply with pro-hotel mandates, or when medical researchers defy those who want to constrain experimentation and progress. Non-compliance is the right stance for society, and entrepreneurs can be counted upon to take it.

Entrepreneurs hold to the ethic of service.

In our current conflicted world, capitalism is condemned by some as exploitative and even evil. Some critics see profits that they deem to be extreme and extractive of the value that workers create, others see pollution and environmental damage. They are totally wrong and completely misguided.

The ethic of entrepreneurial capitalism is to serve others. The entrepreneurial market works when producers identify unmet needs and wants among their fellow-citizens who seek betterment and improvement. Multiple entrepreneurs compete to be the one chosen by consumers to meet that need, rivaling each other to come up with the highest quality / lowest cost solution. The ethic of entrepreneurial service has raised living standards across the globe and lifted billions out of poverty.

Keeping entrepreneurs unleashed will generate more and faster improvements in the future.

Entrepreneurs believe in liberty and property.

Entrepreneurship thrives only in favorable market conditions, with the right supportive institutions. The most important of the institutions is the legal framework to make it easy to start new ventures, favors innovation (Professor Michael Munger of Duke University calls the framework permissionless innovation), and imposes as few stifling regulations as possible, so that otherwise unrealized innovation is set free. Overall, we can think of the institutions of entrepreneurship as liberty – freeing creative minds and brilliant engineers and operators to follow their purpose to wherever it takes them in the pursuit of the profit that comes from consumer approval.

The second major institution of entrepreneurship is property. Entrepreneurs stake their own property in a bet that their business can succeed and grow. They take risks with their own property – and therefore need to operate in a framework that respects private property and their right to do with it whatever they will. When private property is restricted, limited, over-taxed, over-regulated or confiscated, entrepreneurship can’t thrive.

Liberty and property together are the institutions of entrepreneurship. 

Entrepreneurship Yields Meaning And Purpose.

At the bottom line, we all seek meaning and purpose in life. Meaning refers to our framing of the difference an individual wants to make in the world, the feeling that one’s endeavors are worthwhile. Purpose refers to the specific goal the individual pursues as in making that difference.

Researchers John Bitzan and Clay Routledge of The Challey Institute have documented, based on deep research, how individuals’ belief in the free working of the entrepreneurial marketplace provides them with the sense of meaning and purpose they seek. Bitzan and Routledge call this feeling “individual agency” – the feeling of being free to act and capable of meaningful achievement in the institutional context of capitalism and free markets. Individual agency is the central idea of entrepreneurship.

What’s The Ideal Age To Be An Entrepreneur? Let Market Conditions Decide.

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[postintro]This is the first article in an occasional series from Professor Raushan Gross on The Institutions Of Entrepreneurship. Entrepreneurship is a powerful pathway to innovation, growth, prosperity, and a better life for all. Its emergence and thriving are not automatic; it requires enabling institutions. Professor Gross will analyze and explain the institutional supports required for entrepreneurship to play its role in elevating society to the highest levels of achievement.[/postintro]

The condition of the market economy is the most critical aspect of entrepreneurs’ success, not the entrepreneur’s age. Yet, who say the opposite; that there is a Golden Age of entrepreneurial success, and it is 45. The combination of the age of the entrepreneur and the right mindset is said to be the perfect formula for market success.

While I agree that everything takes time, I am not convinced that age and mindset are essential for successful entrepreneurial endeavors in the long run. Although age and mindset have a role in success, we cannot disregard the requisite market conditions that are more likely to produce favorable or unfavorable results regardless of age and mindset. Entrepreneurs need a favorable market that rewards their risk-taking. If would-be entrepreneurs who are not in their Golden Age today are advised to wait to see success when they enter their 40’s even under unfavorable market conditions, we are in danger of eliminating one of the economy’s critical functions – entrepreneurship itself.

Conventional thinking about entrepreneurship is changing before our very eyes. For example, there have been significant declines in small business ownership and new startups, and fewer unicorns decade over decade. Why? Let us say that Rome was not built overnight, and neither was the entrepreneur. Products take time to produce; it takes time to develop a network of customers; it takes time for the entrepreneur to develop awareness, it takes time to find the market error that can be turned into an opportunity, and finally, it takes time for the market to adjust to changes in consumers’ tastes, preferences, and perceptions. Entrepreneurs do not acquire human capital in just one day, nor were economic systems created in one day.

Entrepreneurship is a social phenomenon that manifests itself through the passing of time, and application of human energy and capital, and favorable market conditions. No group of persons sat around one day and created our market economy; it took vast amounts of experiences and knowledge to come together, creating a space for the entrepreneurial function to operate for us. If the Golden Age is 45, and there have been declines in new entrepreneurial births, who will the newcomers follow? How will the ranks fill with those who can imitate the paths of successful entrepreneurs or small business owners?

The favorable conditions of a market economy are essential so that an individual at any age can find and pursue meaning in life. The benefit of favorable market conditions is to allow would-be entrepreneurs to find meaningful ways of applying their human capital to serve society’s most urgent needs, making conditions better for both others and themselves. The market provides a means by which one entrepreneur pursuing their own aims can enable someone else with whom they have no direct contact to pursue their own goals. In other words, productivity begets productivity.  Another benefit of a favorable market economy is that it brings forth visible adjustments, errors, new knowledge, and information, against which entrepreneurs can weigh their subjective opportunity costs in assessing the risk of pursuing a possible opportunity.1

In essence, individuals accumulate entrepreneurial skills and opportunity awareness, but they have to act to put them to practical use, and if they cannot, society pays the costs. The costs amount to a decrease in new entrepreneurship, innovations, and knowledge. People pursue endeavors when they are incentivized to do so, and if they are not it will leave a gap in one of the most critical market functions – entrepreneurship. Rome was built through the experiences and knowledge set in motion by many people over time. F. A. Hayek stated:

“the successful combination of knowledge and aptitude is not selected by common deliberation, by people seeking a solution to their problems through joint effort; it is the product of individuals imitating those who have been more successful and from their being guided by signs or symbols, such as prices offered for their products or expressions of moral or aesthetic esteem for their having observed standards of conduct –in short, of their using the results of the experiences of others.” 2

An open economic system, where individuals of all ages (younger, older, and in between) are encouraged to pursue their economic interest considering their subjective opportunity costs, ipso facto is likely to increase new entrepreneurial births. Therefore, the condition of the market economy is a necessary factor for entrepreneurs to maximize their range of choices and ideas, and to discover and innovate. A favorable economic system provides individuals in a society a way to use their human capital to achieve society’s needs, on behalf of people they will never know directly.

Certainly, age and experience play to the entrepreneur’s advantage, but what matters most is the market economy’s conditions.

How will people who are not at the Golden Age react to the current market conditions? They need a measurable market indicator – others’ success. Who will fill the shoes of the entrepreneurs and small business owners who have vanished? We must remember that Rome was not built overnight, and neither was the entrepreneur and the system in which they operate.

 

[1] Kirzner, I. M. (2015). Austrian Subjectivism & the Emergence of Entrepreneurship Theory. Liberty: Indianapolis, ID.

[2] Hayek, F. A. (2020). The Constitution of Liberty. Chicago, IL: The University of Chicago Press.

 

Raushan Gross, Ph.D. is Associate Professor of Business Management at Pfeiffer University.

4 Rock-Solid Basics Carry Entrepreneurs Through Crucial Periods Of Business Transition.

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[postintro]Please welcome our newest guest contributor, Lucy Reed. Lucy is an entrepreneur’s entrepreneur. She created Gig Mine (https://gigmine.co) to help others dig up sharing economy opportunities in a user’s area, all in a single web location, so users don’t have to jump between multiple sites. It’s the new and improved way to get a gig job![/postintro]

Operating a successful e-commerce or small business takes some dedication. Your business needs the right marketing plan in order to attract your first customers, but you also need to take the right steps to keep shoppers coming back. So, if you are an entrepreneur, how can you make the most of your business model? By following a few simple steps that will help you grow your business, protect your brand, and keep your products in demand with the customers that matter most.       

Innovation Can Create and Keep More Customers

 It seems like the world is changing a bit faster with each passing year. You may need some updated tech, improved marketing, or a fresh look to keep up with these changes. So, make sure your business has the resources it needs to adapt and improve to meet the needs of your customers.

If you’re not especially tech-savvy, there are plenty of human and digital resources you can utilize that will ensure your business keeps up with the times. For example, would your customers benefit from a computer or mobile app that makes your product or service more readily available to them? Working with an app developer on an as-needed basis is a minimal but worthwhile investment for taking your website presence to the next level. Do you want to elevate your web design, but a graphic designer isn’t in your budget? Take advantage of online courses (many of which are free) to learn basic coding skills that will help your site stand out from the competition.

Quality Customer Service Will Always Be in Demand

No matter how much tech influences the ways that customers shop, customer service will always be important. Consumers want to know that their money is being spent wisely. So, if your customer service is not up to par, you could lose out on some major profits. If you operate a small e-commerce business, you can create trust and loyalty with your customers by paying special attention to a few key areas.

Give your shoppers the power to answer questions themselves with a detailed, clear FAQ page. You should also consider providing support via live chat or be expedient in answering emails. If your personal and business inboxes are combined, think about creating a business email so you can stay connected to your customers. Supreme customer service will not only help you retain current customers, but you can also offer incentives for online reviews, which can help you attract even more customers.

Social Media Can Be a Powerful Small Business Tool  

Email and chat should not be the only channels for connecting with customers. According to some recent stats, well over half of adults use Facebook or some other form of social media on a regular basis. With so many current and potential customers likely scrolling through their feeds, it only makes sense for you to take advantage of this virtually free marketing opportunity. So, how can you best promote your business online? First and foremost, you need to identify your target customer base so you can tailor your social media presence. Maybe your product will appeal to a younger audience who uses Instagram, or perhaps you’d prefer to focus your efforts on an older clientele who prefers Facebook.

Once you have your demographic identified, start promoting your brand with frequent posts, customer interactions, and even social media contests. In general, you need to have engaging content that’s eye-catching no matter which channel you’re posting on. For example, having a post on Facebook, Twitter, or Instagram with a photo or graphic that grabs your followers’ attention and linking to a product or how-to article on your site is a great way to provide valuable information about your business that drives traffic to your site. If you are new to utilizing all social media has to offer, working with a specialist to build your presence can provide you with immediate and long-term customer engagement.

Negative Reviews and Feedback Can Help Your Business Improve

So far, we’ve focused on the proactive steps you can take to build a positive relationship with your customers, but what should you do when that relationship sours? Dealing with negative customer experiences is just another part of owning a small business. The way you react, however, will determine whether those experiences hurt or help your business. Some customer complaints will show you problems with your operations or customer service model, so take the proper steps needed to address them. Others may simply be a need for the customer to be heard, so in these cases, take the time to just listen. No matter what methods you use to help heal those customer relationships, be sure to do so in a timely manner.

Most people appreciate a speedy response from business owners, and you may be able to save a lot of relationships by being so responsive. But what if after all those efforts, your customer still leaves a bad online review? You should still do what you can to resolve the situation, but also realize that negative online feedback happens to everyone. As long as you have worked to earn enough positive online reviews, one or two unpleasant ones are not likely to hurt your business.

Some negative reviews are not even real to begin with. If you do suspect your business to be the victim of fake online reviews, it’s important to take the proper actions to report those reviews through the proper channels. This guide offers step-by-step instructions on how to report false reviews to Google, Facebook, and Yelp so they can take action to have them removed. You may not be able to get the review taken down right away, but you can at least begin tracking your efforts to prevent review spammers.

Ensure Your Entrepreneurial Success with These Tried-and-True Techniques

Running a successful e-commerce or small business definitely takes some work. Always pay attention to key business factors, like customer service, brand reputation, and online engagement, which can pay off big for your small business. Put in the effort with the steps above and focus on building relationships with customers that will last. Most importantly, believe in yourself and your product so you can better promote your business.

Lucy Reed’s website is gigmine

Photo Credit: Pixabay

 

The Epic Calling Of The Entrepreneur.

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Many of us feel the pull of contributing to something “bigger than ourselves”. It could be a cause, a charity, a movement, a great project. It could be mentorship in a collaborative organization. Some people even claim that working for the government qualifies: representing (or regulating) the people.

But doing something “bigger than ourselves” does not have to be interpreted purely as a collectivist principle (sacrificing the rights of the individual for the common good), nor as altruism (living for others and not for oneself).

Almost 250 years ago, Adam Smith pointed out that it is not out of benevolence that the butcher, the brewer and the baker provide customers with dinner. Rather, it is out of self-interest. Which is an 18th century way of describing the entrepreneurial ethic of service.

Ethic of service

In an entrepreneurially driven market, customers – by buying or not buying, repeat purchasing or not, subscribing or not – determine what is produced. To be successful, businesses serve customers. They spend an enormous amount of time and money to understand customers and their preferences and needs, and expend all of their resources in an effort to meet those needs in the way that gains approval. Customers are rational seekers of betterment – they buy what will make their lives better, from their own perspective. They seek happiness. That’s what entrepreneurs deliver: better and happier lives.

The reward for utilizing today’s resources in ways that generate the greatest future improvement to society is profit. It is society’s way of pointing to where entrepreneurs should direct their best efforts. The ethic of service is sustained by reinvesting profit into more investments that benefit customers.

The epic calling of entrepreneurs is to join and accelerate this cycle of service, betterment, profit and reinvestment. 

Ethic of Innovation

The market in which customers have all the power is highly dynamic. The genius of customers is to be never satisfied. Betterment is their goal, and betterment never stops. There is always something better in the future, and always a new entrepreneurial market entrant or new R&D team to design it and offer it. 

The result of this dynamic is a continuous stream of innovation – new and better products, services, techniques, delivery systems, restaurants, food, payment systems, movies, TV’s, computers, smartphones, and V/R headsets. It’s better service at every store from the high street to the mall, and every dry cleaners and every nail salon and every gas station and repair shop, because innovation includes treating people better while serving them better. The dynamics of the market means that a customer who receives good service from any provider makes that the standard in judging all others. The momentum in the dynamic entrepreneurial economy is always forwards and upwards, towards betterment. 

Ethic of digitization

Digitization brings rapid betterment at an ever-increasing pace. It’s exponential. Entrepreneurs both initiate this phenomenon and harness it. Entrepreneurs brought us the internet and websites and search engines and e-mail and online shopping. They made almost infinite amounts of information available to us – certainly much more than anyone can consume or use. The digital economy brings abundance, the opposite of scarcity, which is what economists have told us is the norm in markets. Under digital abundance, all choices are going to become richer and richer, the cost we pay for things we value is going to become lower and lower (irrespective of what governments do to their fiat money – amazon.com is going to offer more and more choices and deliver better and better quality at faster speeds whatever the state of the dollar; we may pay with a different currency).

Entrepreneurs employing digital means to serve customers better will operate in this new world, pursuing and exploring the digital challenge: what are the boundary conditions of higher quality at lower cost? How can they bring digital betterment to everyone in the world? 

The emerging standard of digital betterment is that new services need to be 10X better than whatever is already in the marketplace in order to get customers to turn their heads, pay attention, and change from their current services, which are already excellent. The resultant compounding of improvement will rapidly elevate our life experiences.

And, in fact, digitization puts customers even more in charge – interactive technology brings more empowerment and control to customers than ever. We can compare prices more easily, benefit from the experiences of others who supply ratings and reviews, perform more tasks more quickly and easily, and orchestrate our own system of services and experiences in exactly the combinations we prefer. Customers will decide which digital providers they choose to allow into their lives. Only the best will qualify, and entrepreneurs will strive to be in that group.

Ethic of private property

It has been pointed out, most notably by Ludwig von Mises, that the entrepreneurial system requires acknowledgment and protection of private property to operate. Investors are free to invest in projects they judge to have the potential for high returns, founders are free to allocate their own time and resources to their innovative ideas, and customers are free to spend their own money on offerings that please them. This private property-based entrepreneurial system has brought the world increasing standards of living and quality of life for roughly 250 years, lifting billions out of poverty and squalor. Today’s entrepreneurs preserve that progress, despite the efforts of socialists to reverse it and replace private property with state ownership and bureaucratic control. No calling is higher.

Better world, better society

There is no shortage of pessimists who see the world through the lens of decline. Most of this is partisan politics, which is, indeed, descending to new lows. Some of it is politics combined with scientism (as in climate change fear). A good antidote to this pessimism is Hans Rosling’s book, Factfulness, which compiles hard data from impeccable world sources demonstrating the incredible, consistent and ongoing global progress in fields like life expectancy, child mortality, reduced incidence of poverty, growth in living standards, levels of education, elimination of disease and even reduced pollution. 

Entrepreneurship makes all of these possible via positive thinking, ideation, innovation, organization, and analytics. But, beyond these functions, entrepreneurship is the dominant force for good in the world. Entrepreneurs are optimistic (because they see the opportunities for progress), polite (because they value relationships), collaborative (to make relationships productive), law-abiding (the wrong side of the law is unprofitable), non-violent (violence is also unprofitable), and civil (because community building contributes greatly to success).

Epic calling

In Yu-Kai Choi’s book Actionable Gamification, which is an insightful analysis of human values, Epic Meaning & Calling is the core drive that is in play when a person believes they are doing something greater than themselves. Entrepreneurs experience that calling. Whatever their individual firm, invention, project or initiative, they feel the higher calling of betterment, and they derive part of their psychic profit from responding to that calling. They feel different and special because of their role and their contribution. 

And their contribution is, indeed, special. They are the drivers of the free market economy that raises everyone’s potential and attainment. They are the pillars of a collaborative culture of achievement and accomplishment. They are the creative catalysts of change. Society is better the greater the role and influence of entrepreneurs.

More of us should respond to the epic calling.

Thinking About Reducing Marketing and Advertising During This Down Economy? Perhaps You Should Think Again.

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These are interesting times for sure, with many small and large companies making hasty decisions to cut back and, in many cases, to cut out of their budget, the most competitive market tool – advertising.

Companies that are in survival mode should not decrease their advertising spend in the short run. It is an error to assume that customers are not searching for information about a product or service that you can provide. While on the surface, it might seem clear-headed to eliminate marketing activities to protect your firm’s assets, but might we not forget that marketing in general and advertising, in particular, are, in the end, informational devices that drive revenues for the long-run? Everything has a cost, even information, which increases customers’ knowledge of what you offer, location, and price. Advertising identifies sellers to customers and reminds infrequent customers about changes in the state of the market. Companies change what they offer and at what price, along with the changes in customer consumption patterns. Therefore, marketing is an investment, not an expense – this especially rings true for a down economy.

Some say companies that consistently advertise reap significant market benefits more often than competing companies, even during a down economy. Marketing – as far as advertising is concerned – offers firms a market advantage when it comes to customer search costs and brand awareness in the long run. Decreasing marketing and advertising during a down economy comes at a cost to the company and the customer. Cutting advertising diminishes the amount of information in circulation, thereby cutting brand awareness, customer conversions, and unit sales. Essentially, in a COVID economic landscape, firms that do not produce information, i.e., do not advertise and promote their products and services, increase customers’ search costs. In a post-COVID landscape, those firms that decided to decrease marketing and advertising will have created an uphill battle for themselves, making it extremely difficult to break through the noise! If you want to be a market leader, understand that it costs to be the boss!

Marketing is information dissemination, and the firms that do not provide customers with useful information promptly are sure to lose market share, awareness, and customer commitment. Even more costly to the firms that do not advertise during this COVID economy will be the loss of permanence and significance, especially for nascent companies. Newer companies will suffer the errors of not advertising during a down economy in the long run. As opposed to established companies, nascent companies have to break through established brand positions in the market.

Case in point, customers do not know what they need to know unless you tell them – and trust me; they want to know! Without your firm’s marketing, customers will be forced to search and purchase elsewhere. In other words, customers have high time preferences – they want satisfaction now – and added high search costs now will result in a more uncertain future for a company.

Now is the time to be even more vigilant about informing and educating your customers based on specific quality measures, prices, and your offering’s importance to them. Remember, market success is about the delivery of a timely, essential product or service information. Information delivery can be accomplished by incrementally informing customers via content pages, digital campaigns, podcasts, digital marketing, and digital promotions to reap the benefits of digital flexibility that increasingly lower customers’ search costs.

We must also not forget that advertising is a social function. A function that should not be ignored but fulfilled. At the same time, advertising is the primary device in which companies of all types bring forth market opportunities to customers. That is, the information costs incurred by the customer are the driver from not knowing to know. Why would customers cease to accept information from their market providers during a down economy? Do customers cease buying things of importance during a down economy? Brands that are choosing to go dark on marketing must think about the subjective nature of customer value and expectations. Failure to meet expectations in the future will result in long periods of resuscitation going into a post-COVID economy.

There are many new methods on the horizon for you to deliver timely advertising. However, it is best to use the technique most satisfactory to your customer, not to all customers, i.e., customers are different in the information needed. Tailored information delivered to your customer during this slowdown is a moment in time where much ground can be gain in lowering knowledge acquisition costs and increasing rapid-fire production of information. Continuous advertising, during this down economy, enables customer conversions and, at any rate, reduces the information cost for customers who find themselves searching for updates of the state of the changing market.

Knowledge comes at a cost. Therefore, the mistake of not advertising will indeed allow a competitor to reap the benefits of your inaction. Unfortunately, customer information and decision-making often are based on past market conditions. Trust me; your customers will love you for keeping them in mind and lowering their search costs, and showing your commitment to them when times are not so great.