I have good news and bad news on the good economy we are enjoying.
Let’s start with the good news: For many small business owners, the good economy will mean easy sales, more money, less stress, and more cool toys.
Although the state of the economy is great news because it allows customers and prospects to spend more money (especially on elective and luxury items), not all the news is positive.
The Challenges of a Good Economy
You may have noticed it is more difficult to hire people, and when you are hiring, you may even have to increase what you’re paying to get quality applicants.
Given the 3.8 percent unemployment rate, if you want a job and you have a pulse, you’ll get one. It may be a crap job, but you’ll still have one, and it likely pays pretty well.
When entrepreneurs are forced to pay their employees above what their skills are really worth, it is only a matter of time before those less talented people are laid off or fired, which isn’t good for anyone.
Another issue you may have noticed is a decrease in your response rates on your marketing. This problem is also common in a good economy. You see, when people are flush with cash, your discount offer that used to work so well is simply not enough to get people to take action.
It may seem crazy, but in a good economy, you actually need to improve your offer and make it more lucrative in many cases. Of course, this typically has the added benefit of driving more people toward you than ever before, but the success comes at an increased cost.
The Reality of Recession
At one point during the Great Recession, my wife, Mariah, and I were so broke that she did some crazy couponing. She’d get a dozen newspapers, and we’d buy stuff for pennies on the dollar. I remember one time when she found a deal for baby wipes that got them to 21 cents per box, and she bought out all the Walmarts across the city. We literally had over 250 boxes of baby wipes, all for about $60.
Fortunately, we haven’t had to do any crazy coupon shopping in nearly 10 years, but when we were getting our first business in Boise, Idaho, off the ground, it was necessary.
Those offers still exist today, but it takes hours and hours to find those deals and even longer to buy everything. It’s practically a part-time job in itself. We simply couldn’t invest in that today.
Getting people to use coupons is so much more difficult now. I’ve never really used them, and it has to be a crazy good deal for Mariah to do it now. But if you want to attract an affluent person like my wife to your business, your old offers may simply not cut it in a good economy.
Balancing the Good and the Bad
One other change you may need to focus on is your messaging. For example, in my business, newsletters are really effective in a few key areas:
- Retention of existing customers
- Getting more referrals
- Closing more prospects
- Additional sales to existing customers
Of course, there are other benefits, but you get the point. You see, in a bad economy, the best benefits for us to talk about are improved retention of existing customers and improved sales to existing customers. Why? Because that is when the sky is falling and people are losing customers left and right with few new ones coming in. Keeping the customers they already have is a huge priority.
In a good economy, the messaging of “retain existing customers” doesn’t work as well as “get more new referrals and close more sales.”
The reason is that many businesses have a higher number of new customers buying than normal, so the focus on retention simply isn’t there. It isn’t worth their time and marketing budget.
My newsletter product hasn’t changed. Newsletters still help with all four of the areas I listed, but we’ve found that shifting messaging based on the economy helps us close more sales.
Now, you may think it’s counterintuitive to do this in a good economy. You may even wonder why I would spend more for a new customer now. Why don’t I simply cut that marketing? After all, I’m getting plenty of new customers as it is.
This is the exact thinking that kills businesses when the economy turns. When the economy is strong, keep your marketing going and improve it where you can. The key is to take good existing metrics and make them great.
The Bottom Line
Good and bad economies come and go, and this one will pass, too. If you’re thinking, “Well, this one won’t pass soon,” think again. Economists say we’ve been in a rising economy since 2011. It may not have felt like that to most of us, but they use math to figure these things out, and I typically don’t argue with math. (Except common core; that’s just B.S.) You need to be prepared for when the ride is over.
When the economy is good, the key is to double down on your marketing. It is the time to be bold with your offers and take care of the customers you’ve got. Do all of this, and not only will you thrive over the next few years while the economy is rocking, but when we do take a downturn, you’ll be well-prepared to ride the wave and come out on top.