The recession may be bottoming out, but consumer spending is still pretty low. And it won’t get any better for a while. When people are unemployed, they don’t like spending money. And when people are afraid of being laid off, they don’t like spending money. It’s simple psychology. But people not spending money just makes the economy even worse. The economy runs on the transaction of money. If there’s no money being transferred from one person to the next, the economy will sink. So the less people spend, the worse the economy gets, which causes people to spend even less, which in turn makes the economy get worse. It’s simple economics. Everything snowballs. Things just get worse and worse, and people get more and more afraid.
Let’s say that you’re a business. People aren’t buying your product because consumer spending is down. That means less revenue for you. Maybe you have to lay off a few people you can’t afford to keep on. But there’s still work that needs to be done. So the work from the laid off employees gets delegated to the remaining employees. But your remaining employees are already up to their noses in work. So what happens? Productivity gets cut. You’re unable to deliver, which in turn cuts your revenue once more. Everything is snowballing again.
So how do you save your business? Do you simply stop spending money? If you cut down on marketing costs, you may save money in the short run, but you’ll lose new customers. So what do you do?
I’ll tell you the answer…in my next post.
