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The New, New Economy

The New, New Economy

When the economy shifts gears and turns up, we won't be on our way to the good old times again. We'll be entering a new, new economy -- one in which streamlining operations will be essential to counteract slack demand. Social media tools can play an important role in lowering operational costs and opening the door to stronger sales.

By Denis Pombriant
04/08/09 4:00 AM PT

I almost couldn't have imagined it. I give myself a little leeway, but after years of writing and talking about "new, new things" it didn't really dawn on me that at some point we'd be talking about a new, new economy -- but we are.

I was speaking with Brian Zanghi, CEO of Kadient, the other day, and our minds happened to convene on the idea that we are not so much in a bad economy, though it is all that and more. We are in a new economy, however; one that is more resource-constrained and where demand is slack. The question is not so much if we will ever see the golden days of 2006 again but what 2010 will look like.

To be sure, things will improve -- but even given some improvement, in many markets, the thirst for new and more is slaked for now, and we are re-acclimating to more-controlled circumstances. Zanghi and I were talking about sales and how to do it in an economy that is, well, new -- and I think this recession won't make sense unless we take that perspective.

If this were a garden-variety recession, we would simply hunker down and let the storm blow over. If this really were that kind of recession, then all the talk about selling through a recession might make more sense than it does. However, to say that this is a new economy is to say that the old approaches to even a recession will not work very well anymore.

So, what are the attributes of the new economy that we need to consider? Perhaps, surprisingly, they are some of the same attributes that we were discussing last summer when the cost of a gallon of gasoline easily exceeded the cost of a gallon of milk.

Slack Demand

We have slack demand right now -- one of the cornerstones of a recession. Instead of having too much inventory that needs to be worked off, though, we have too little credit. Demand is evaporating because credit is scarce. You might want a new car -- but if you can't get credit, it won't matter to the dealer. For the dealer, demand is slack.

A sales tactic for these times will necessarily require some enhanced form of vendor participation in financing purchases. Zero finance charges are something I think we will see more of beyond the auto dealership.

Retailers are offering layaway plans again -- a form of zero-interest financing -- and car dealers have been offering sweetheart finance deals for many years. The other day, I saw an ad for HP notebooks with 100 percent financing and generous terms. It's starting.

The Need to Do More With Less

Anyone who has been to the gas station recently knows we're beginning to see fuel prices increase. As the economy begins to improve, we will see that trend continue. Economists call it "Jevons' Paradox," after the Victorian era economist who first noticed that as the use of commodities becomes more efficient, more -- not less -- of the commodity is used.

There is more global demand for fuels than ever, and it is rising while the supply is constant -- a classic situation that results in bidding up the price of the commodity. The rising cost of fuel will hit every sector of the economy and, therefore, one of the big themes of the New Economy is doing more with less.

Practically speaking, we're seeing sales organizations reduce headcount and curtail travel for all but the most necessary situations. However, cutting is not the answer; finding new ways to get the same results with fewer inputs is, and it's something that cutting-edge sales managers and their bosses are going for.

Into this category you can add more virtual events, strategic use of video, and more-creative use of the Internet and social applications. Do you have corporate video? Is it on YouTube?

The Age of Operations

We oscillate between periods of focus on customer centricity and operational improvement in sales. This will sound like heresy to some people, but I think the recent era of customer centricity may be ending. It's not that customers are not important anymore (are you kidding?!) -- it's that we've pushed that rock up the hill about as far as it will go for now.

We need to focus on all the operational improvements that make our companies easier to work with, from providing better financing schemes to making it easier to make a decision, sign a contract or pay a bill. The good news is that there is software or SaaSware for all of that.

I think operational motivations are at the heart of some social media uptake trends. Rather than waiting for vendors to get the idea of improving operations, customers are taking matters into their own hands. Social sites are increasingly where people go when they want to know something -- how others have fared with a solution, how a product works, how to configure and fix it. If that's not streamlining the operational interface with a company, I don't know what is.

I got an email this morning about a new analyst report purporting to show that social media is not helping to close many deals. Here's a news flash: It's not supposed to be a closing tool. Social media is an opening tool, a way to keep lines of communication open and maybe even keep pipelines full. It might even help reduce the sales cycle.

I think Brian Zanghi was right; it's a new economy, a new era. Markets hate uncertainty. If this analysis is more right than not, we should be at the beginning of a recovery soon.


Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant's research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at denis.pombriant@beagleresearch.com.


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