It's the Conversation Economy, Stupid!

SHRINKONOMICS – How should we adjust to the incredibly shrinking economy?

The economic downturn has caught many sales leaders by surprise. In some industries the effects of the downturn have been so severe, so dramatic and so different from anything sales executives expected that the lessons they’ve learned in the past proved to be useless. Even the brightest economists are unable to predict where the current recession is headed. While some say the worst is over, others believe that we’re headed into a double-dip recession. World leaders at the G8 Summit realized that the economy has not turned around, but agreed that further stimulus is not needed. A trusted source who has access to the country’s top financial policymakers in DC told me that “we’ve moved from planning to improvisation. Nobody knows what’s going to happen in the next quarter and they are making things up as they go.” One CEO recently said, “It’s like playing in a championship; we’re behind with our numbers, our game plan has stopped working, we have to focus on the next ten yards.” While the entire world is operating in a fog, there are some hard facts available that we can’t ignore. Here are a few slices of the shrinking economic realities: 

Most State Governments are shrinking. 48 US states are facing a collective budget gap of over $168 billion. Companies that have been selling to state governments have seen their sales shrink and collections grow.

California recorded a deficit of over $24.3 billion companies have decided to no longer sell their services to the state of California. Who wants to get paid with an IOU?

Consumer Confidence has been at the lowest level in Feb and March 09, grew in April and May and started to shrink again in June. Only 8% of people surveyed said that business is good. June Retail sales have dropped unexpectedly. Consumers are getting used to belt tightening. Cutting back is the new black.

Airlines are shrinking their fleets to get fewer and fuller flights. Southwest CEO Gary Kelly says, "We won't go out of business if we have too few airplanes. The bright spot: Since first class seat sales are down over 20%, it is easier to get upgrades. This is the time to cash in your airline miles for first class travel.

More lawyers getting the axe - In the past six months 125 major law firms have shrunk by 10,725 people. Check which big law firm is doing well before calling on them.

The number of millionaires is shrinking – In the latest World Wealth Report, by Capgemini. The number of millionaires and their wealth have decline dramatically. In 2008 the combined wealth of the world’s millionaires dropped 19.5% to $32.8 trillion. The hardest hit category: The Super Rich category with more than $30 million in assets dropped 24.6% and the remaining group’s wealth fell by 23.9%. This trend has affected yacht sales, airplane sales, second home sales and the luxury market.

The Automotive industry is in crisis mode. Everybody knows the painful adjustments manufacturers, union workers and automotive dealers are going through. Anyone who sells to in this market deserves a medal.

The Hotel industry suffers from shrinking travel budgets. The average occupancy rate for the 4th of July week-end nationwide was 57.7%. Luxury hotel rates have dropped to an average of $211 per room night. While many sales organizations have trimmed their travel budget, those who are on the road enjoy room upgrades and a grateful hotel staff with more attentive service.

Poverty is on the rise. The Bureau of Census reports that over 37.3 million Americans live in poverty. Since this number is from 2007, experts estimate poverty to increase until the end of 2010. The total number of Americans who experience homelessness on any given night is 3.5 million. The sad part is that there are over 131,000 homeless veterans. There is a new trend of new homeless people moving into tent cities that pop up near parking lots across the country.

The outlook for the balance of 2009 is uncertain. One of the best industry by industry predictions comes from Deloitte’s 2009 Industry Outlook. The bright spots are Aerospace & Defense, Life Sciences, Media & Entertainment and the Green Movement.

As sales leaders plan for the last quarter of 09, it is a good idea to take a hard look at an excellent paper by Ernst and Young that describes how companies have found Opportunities in Adversity. Their survey shows that 82% of companies are focusing on cash management and cost cutting. This means that salespeople will hear budget objections in 8 calls out of ten. Only 25 % of companies believe that the worst is behind them. The recession has put conventional management thinking on its head. Tough times can bring out tough behaviors that are driven by fear. Smart managers focus on efficiency and effectiveness gains through better processes and better technology. Selling Power is addressing this part in a new Sales 2.0 Conference at the Fairmont Hotel in Chicago on Sept. 10th.

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