By Olu Akanmu
As we approach the year 2009, marketing practitioners are expected to develop their business plans or fine tune their roll-over plans into next year. 2008 has been a very eventful year with the global economic melt-down. What started as a seemingly remote mortgage crisis in far-away America eventually touched many parts of the world. For us in Nigeria, because of our relative weaker integration into the global financial system compared to Europe and the Asia, it took significant time before we saw the first ripples of the global economic tsunami. While the global economic melt-down was going on seemingly from afar, our economy witnessed strong internal shocks occasioned by the collapse of asset (stock) prices. The collapse of asset prices in 2008 was the result of our internal economic contradictions, inflated asset prices that have very little bearing to business and economic fundamentals, investor greed, herd behaviour and sentiments that assume that economic cycles of booms and slumps do not exist in Nigeria, that asset prices will forever keep going up and weak regulatory frameworks that magnifies the previous factors.
Asset price bubbles in stocks and properties in 2007 and 2008 fueled strong business and consumer confidence. Consumer spending was high especially in the middle class driven by the expectation of increasing asset prices and household income. With the global economic melt down, oil prices have crashed from as near 150 dollars to about 50 dollars. This will have significant effect on government income, investment and expenditure in 2009, and impact on the flow of money to households and ultimately consumer spending. Some analysts have opined that the Nigeria stock market tends to lag behind the global stock market by one year. In essence, their opinion is that the collapse of global asset prices in 2008 will come fully to the fore from next year in Nigeria. Essentially, while unlike in Europe, we may not witness a total recession, 2009 is definitely a year of economic slow down. This coupled with the collapse of asset prices and a significant drop in consumer confidence to spend, will impact business revenue and market growth trajectories in 2009.
What does this mean for us as marketing and strategy practitioners?
a) Consumers are likely to be far more rational in their purchases next year as a result of un-expanding wallets and household income.
b) Luxury goods sector may witness significant decline. Many middle class people have traded up their consumption as a result of expectation of accelerating income driven by asset prices. There is likely to be a visible slow down in this sector.
c) Businesses that are yet to connect to consumer credit financing and networks may be unable to absorb the shocks of drops in consumer confidence and spending. The increasing availability of consumer credits will give products and services that have tapped into this service, a cushion to the drop in consumer confidence. Please, see my presentation on “15 Changing Context of Marketing Today” at the launch of Global Marketing Network in Nigeria.
d) A shrinking or a slowing-down market implies a more intense competition in 2009. In an era of increasing commoditization of products and services, we may witness new price wars as businesses try to out-compete each other. Yet this will not provide the succor that many businesses will require. Only products and services with real and tangible differentiation will pull through and survive the coming price wars in 2009. Please, refer to article Be Different or Die on this blog http://olusfile.blogspot.com/2008/11/be-different-or-die_9843.html
e) Rationalized marketing budget by mid-year: With intense competition and gaps between revenue targets and performance, it is likely that many businesses will rationalize their marketing budgets by mid-year. This will put even more pressure on marketing practitioners as their promotional arsenals are cut or scaled-back. Marketers who do not understand how their marketing investments add value and the return that such investments deliver are likely to be confused. If you use to do five things before and now have to do two, unless you know the real leverage and returns on the five things you do, you may not take the right decisions on three things you need to rationalize.
These are some perspectives on next year marketing issues? What are your views? Please, share your view with marketing colleagues by posting your comments below.