The recession is in full swing. The Minister for Finance, Mrs. Kemi Adeosun confirmed this last month. Now, many people use the word recession in the same context as an economic downturn. For some people, a recession means inflation. Prices are high. Higher than they were the previous year for example. For others, a recession means unemployment. And for a smaller but significant few, a recession means ‘dollar has gone up’.
For just about everyone, a recession means less money or no money at all
That’s the long and short of it. There’s less money to spend now than there was before. But, a recession has a more formal definition than ‘no money’. A recession is when the economy shrinks for more than 6 months. So imagine you run a small business. If after doing well for a year, your sales goes down in January. No cause for concern. After all, it is January. Then it goes down again in February. Then again in March. And April. And May. It goes down yet again in June.
If by this time you haven’t had a stroke or gone into depression, your business would technically be in major decline. And if it was a country, it would be officially in recession. But Nigeria as always is different. Our recession is compounded by rising prices across board – food, building materials, fuel costs. A combination of inflation and recession is called stagflation.
So technically, we are in a state of stagflation and not a recession
We could continue with the economic lessons but let us look at one of the practical aspects of the economic situation we find ourselves in. How does the recession (or stagflation) affect consumers’ choices?
For one thing, people are less picky. Because of our peculiar state of rising prices and falling economic activity, people are slowly ditching quality and instead focusing on price. So rather than sing about the wonders of Maggi, people are instead using Onga. Cassava replaces yam, ‘my tailor’ replaces TM Lewin, and Nasko replaces Kellogg’s. Essentially, locally made goods must now replace imports. And it is here that the price versus quality issue is most evident.
But this is not about the merits of buying Nigerian. We’ll leave that to the ‘common sense senator’. Instead, the recession-stagflation has shown one thing to be clear: price is the ultimate determinant for buyers when the chips are down. The chips in this case, being the economy.
Price versus quality changes with economic fortunes
And so for small businesses looking to survive the recession, the marketing strategies must change. Branding is a secondary driver in a recession. Tastes and preferences are all skewed more towards ‘reality’ – people buy to survive. Buyers make purchases on a more fundamental level. On a need basis as opposed to wants. While it may seem a little extreme, this is probably a good time for traders to stock up on cheaper brands which were neglected during the time of plenty.
The lesson is clear: as an entrepreneur, the best strategy also known as strategy 101, is to sell what the consumers want. Now there’s an even more fundamental strategy – sell what the customers need. Nobody needs a branded product to survive. That’s vanity. So, if you can convince your customers to try new cheaper alternatives, it is quite possible that you may end up thriving in a recession.
We must find a name for people whose businesses grow while others suffer. Stagpreneur? Or just Shylock.