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 Leveraging The Internet In The Recession


Marc E. Babej and Tim Pollak

This will be the first recession in which the Internet will play a central role for the American consumer–and for marketers.

Of course, the Internet was around during the shallow recession of 2001, and almost 50% of Americans were using it. But it was not yet embedded in our way of life, largely because broadband penetration was, at the time, only about 20%. Today, more than 70% of the population is online, with more than 80% of these Internet users having high-speed access.

The Internet has empowered consumers as never before, providing previously unknown and unimagined opportunities to make informed decisions with detailed information, product ratings, expert and user-generated reviews and price comparisons on anything from computers to coffee beans to cat food.

In good times, when consumers feel cash-rich and time-poor, they can afford to be less diligent about their spending. But as economic pressures mount, sentiment changes. People feel cash-poor and are more willing to invest time and effort in getting the best deal.

What sets the current recession apart is that, for the first time, consumers have a tool that empowers them to subject everyday buying decisions to the kind of scrutiny formerly reserved for big-ticket items and large business-to-business transactions.

Marketers should anticipate this shift. They will not be able to rely on ads to pull the wool over consumers’ eyes–or on imagery to wow them.

Maybe even more important, it won’t be as easy for companies to control the expense line to make up for the loss of top-line revenues. In past downturns, cutting corners on quality has been a virtually foolproof way to cut costs and boost margins, at least in the short-run.

Not this time. Not when consumers can set the bar higher and easily find what they want at the lowest possible price. Not when any degradation of product quality or crummy service experience is subject to being instantly “outed” by the bloggers and reviewers on the myriad user-generated consumer review sites.

“Caveat emptor” now has a companion: “seller beware.” Even the slightest marketing chicanery is liable to be instantly pilloried on a global network, especially when consumers are fearful and on edge.

A confluence of factors has increased the likelihood of more consumers turning to the Internet to manage their way through their personal household recessions.

Let’s start with the price of gas. Shopping online is just less expensive than driving to a store. Depending on how and where you shop, you can find tax savings and shipping deals online.

And the downturn is dovetailing with a plethora of new, category-specific consumer review sites. Joining broad-based veterans like Epinions, BizRate and CNET are narrowly-focused comparison shopping sites specializing in coffee, beauty products or pet supplies.

There’s also been an explosion of online retailers: from Amazon and its brethren, to the online divisions of bricks-and-mortar retailers, to the many niche stores that exist only online. And then there are the Internet’s versions of “mom and pops,” “stores” that do business within the cozy confines of eBay (nasdaq: EBAY news people ) or Craigslist. It all adds up to a bonanza of choices for cash-strapped consumers–and a new set of challenges for those who sell to them.

Virtually anyone selling anything should be online, with as much sophistication as they can afford or muster. And they should follow two cardinal rules:

–Maintain quality and don’t over-promise. When anyone who uses your product or service can readily find an audience to whom to complain, the road from credibility to ruin is very short.

–Keep a close eye on pricing. The online dynamic is totally different than having customers in your store, where they might be willing to pay a premium because they’re there. Facing a page of pricing options online, shoppers can go to another “store” in a matter of seconds.

Online shopping–and the use of price-comparison engines and consumer-generated reviews to make buying decisions–has been growing steadily throughout the decade. The recession is going to supercharge that growth as current users find new categories in which to shop online and as millions of others jump in to manage their shrinking budgets.

As shoppers become increasingly comfortable with the process during this downturn, it is likely that the combination of convenience and easy-access to comparative information could cause enduring changes in consumer behavior.

Marc E. Babej and Tim Pollak are partners at Reason Inc., a marketing-strategy consulting firm that works with clients in a range of categories, including media and entertainment, financial and professional services, packaged goods and the public sector.

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