FEBRUARY 2009 NEWSLETTER ARTICLE

An Economic Forecast
Historical Data Shows that Now is the Time to Start Planning Your Next Marketing Effort

Our newsletters typically provide information on the latest developments in sustainability and environmentally friendly initiatives because this is our specialty. But as we begin a new year in a tough economic climate, we’re going to make an exception here that I hope you find equally informative.

While cleaning my office over the holidays, I came across an old notebook that contained the details of a quite remarkable business development strategy. It was developed by a guy named Tom Hammons. I worked for a company owned by Tom in North Carolina more than 10 years ago.

I often encouraged Tom to write a book and go “public” with this theory. I think he could have made a lot of money. But as he blatantly pointed out to me, he already had a lot of money, largely because he follows this plan, and he was not inclined to share this information with potential competitors. Tom was a genius in a lot of ways and I learned much from him, but the days we spent discussing this plan were the most memorable.

Using data that he accumulated back from the 1940’s, Tom developed an economic model that conclusively shows how commercial business activity rises and falls over a seven to ten-year cycle, over and over again, based on a series of fiscal and economic indicators. Let me emphasize that this data was designed for commercial or business forecasting (manufacturers, distributors, etc.), not the consumer market. According to Tom’s data, the consumer trends tend to lag from six to nine month behind the commercial numbers.

The chart in the notebook ended in the early 1990’s, when I left that company for another job, so I spend a few hours researching on the Internet and came up with the numbers I needed to finish the graph through 2008. Some curves are steeper than others and, according to the data, our current business cycle represents the second steepest downward curve on the chart.

I discovered that chart has been a nearly perfect economic barometer for the past 70 years. And the point I want to make here is that there’s some really good news in all of this. Over the past few weeks, gold shot up over $140 per ounce to a level (as I’m writing this) above $860, and the Dow Industrials have risen over 1000 points over the past month. These are two of the 12 elements used to plot the graph in Tom’s plan.

I’m not nearly the expert Tom is, but the data clearly indicates that, from a business perspective, the second and third quarters of 2007 bottomed out the curve and it’s now on its way back up.

But wait, there’s more.

Tom used this data to guide a number of his business strategies, including marketing. This is the part of the plan that I have found most intriguing. There are four suggested spending levels dictated by the graph that ranged from “no spending” to “max spending.” I was responsible for developing the marketing plans for two of his companies and the reason why he showed me this plan is because I was trying to convince him to take advantage of a great advertising opportunity, but it happened to come in the middle of his “no spending” period.

The “no spending” strategy kicked in when the chart started trending downward from its peak. The “max spending” was initiated once the graph passed the midway point on its way back up.

There were two general rules: Always spend going into a growth phase; and never use marketing dollars to try and reverse a downward trend because it never works. The current floor of new car advertising is a great example.

We are currently in the cycle where the curve is starting its upward motion, the segment Tom calls “Positioning.” He was fond of military metaphors, so he defined “Positioning” as making the bullets and the training the troops in preparation of the impending war.

For our purposes, I interpret “Positioning” as planning. This is the time to review your product lines, literature, training aids, CEU programs, specifications, electronic catalogs and binders, and other marketing tools. Freshen up your web site, plan your first advertising or promotional campaign and crank out some fresh PR.

Based on the numbers, the third and fourth quarters of 2009 and the first quarter of 2010 should justify a switch from “Positioning” mode to the next phase, “Moderate Spending.” The trend should be approaching the top of the peak in summer of 2011 when the mode is “Maximum Spending.”. If you wait until then to start spending and create awareness of your company and products, it will be too late! Likewise, if you wait until after this year to begin the “Positioning” phase, then you will likely lose market share and limit your potential sales and profitability when the cycle hits its peak.

As we all head toward a more prosperous New Year, remember that you heard it here first.

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