Sunday, December 28, 2008

2009, the Economy, and You

I have felt for about 12 years that the world economy has been experiencing deflation. It has shown in bits and pieces.

The price of a pair of blue jeans at WalMart has been a good gauge. As free trade moved jobs, as Y2K opened up outsourcing, the basic price of so many goods and services have been on a consistent downward fall.

There were many things that masked this but in 2009 I feel there will not be anything to mask it.

What are the retailers going to do to get rid of their unsold goods. I would assume cut prices. But I also assume they will cut orders for new goods.

What are car manufactures going to do with cars as old as 2007 still on lots as new cars? I heard somebody say they were shipping unsold cars to Russia to get them out of the US market. Even so, I think they will make a lot fewer cars in 2009.

So my feeling is that price deflation is going to be a force in 2009 for anything that is a physical product which does not spoil. Food is safe. Blue jeans not safe.

Services like car repair, car towing, non elective health care - things you just have to have will likely grow in 2009. These places will not add jobs, they will just have more business.

Products like car insurance or homeowners insurance will probably see price increases. We have seen so many insurance company's investments drop so much in value that insurance companies will need to increase prices to get their surplus rations back in line. This price increase will take up surplus that in the past few years has been used to write new business. I think many insurance companies will cut back on trying to grow market share as a result.

In area's where goods are not being sold and so not being ordered, manufacturers will have to reduce employment. Fear of job loss is already part of this current slow down in sales. Higher unemployment in 2009 will make this fear stronger and cause the continued slowdown in spending by consumers.

If you are an insurance agency what should you do? Your customers are going to have less spending money and not be in a mood to spend it. You companies are going to be raising prices so your customers are going to shop.

If you can keep you customer base you will actually be in a great position to grow in 2009. How are you going to keep your customers?

Now is the time to start spending a part of everyday learning how to use the fantastic communication tools that have come into the market in the last decade. And you are going to need to learn by doing.

I used to sail with two friends. One was a top administrator for the EPA. The other was a regional director for a mental health agency. They liked to study problems before taking any action. so when we would be coming up on shallow waters in the North Carolina sounds they would like to have a committee meeting about what to do. I would yell "Ready about", "Hard alee" and turn the boat.

You need to take this "turn the boat" attitude this year. You will get better by practice and doing.

Concrete steps to take:

  • Start an agency blog. Post at least twice a week.
  • Oh - if you do not have a web site, set up a web site.
  • Start reading online forums for the types of customers you have. You can find these simply by searching for the topic plus the word forum. Example "tow truck forums".
  • Start using email to distribute a newsletter - or blog updates for subscribers.
  • Learn how to make a short video and post it on

This is not a complete list. It is a work in progress. The important issue is you need to begin communicating pro-actively with your customers. Get out ahead of them. Be sure they know it. Don't let the next communication you hear from them be about how they are moving their business because the price went up.

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