In case you hadn’t noticed by the amount of extra cash you’ve had to spend at the gas pump, in stores, or with your vendors, inflation is back – with a vengeance.
According to U.S. Labor Department stats just published, inflation pushed up to 5 percent for the 12 months ended May 31 – a 13-year high. For many marketers who have spent the past 18 months riding a stomach-turning economic roller coaster, this news may seem hard to understand – or to put into context.
I recently was asked this very question: How the heck do I adjust my go-to-market strategy to ensure sales success in an inflationary environment?
The answer, simply – you don’t. In fact, marketing today need not be that much different than in a non-inflationary environment – but with a few caveats. To help better understand this concept, I caught up with my friends at ITR Economics, who offered some keen insights that I think will be useful to you.
The first key is to zero in on what is actually taking place in the competitive marketplace -- outside of the walls of your enterprise. Is inflation having an impact on those markets? I find that the best insights on specific verticals are published in the ITR Economics Monthly Trends Report. They've recently released their June 2021 report, and in it, they remind us of the cyclical nature of the rate of inflation historically. Inflation has always cycled upward and downward, and you can believe that it's going to do that again. Inflation, like the Dow, elevators, and the sun, just goes up and down.
That said, many business owners are concerned about whether higher interest rates are an inevitability, should inflation continue to run rampant. Though interest rates may uptick modestly, ITR suggests in their June Monthly Trends Report those concerns should not interfere with a business's plans about growing the company and protecting their bottom line, especially in the short term.
While they suggest CPI inflation is on the horizon, it’s no guarantee that any one factor will eventually cause interest-rate headaches: “That is a fear for a future day. Don't let it stop you from planning on a growing economy, albeit at a varying rate through the next several years.”
The report also pointed out that business owners with concerns about higher interest rates are about a year ahead of what ITR has concluded, via their analysis of the Fed and the bond market. Finally, ITR states, “Our forecast calls for inflation to diminish starting in the second half of 2021.”
That means inflation is not going to rise indefinitely, and that should be good news to any CEO. So what's a business owner to do?
I can tell you -- as a fractional Chief Marketing Officer who has seen my share of changing markets – the status quo should again reign supreme. Even in an economy that's strongly impacted by inflation, now is not the time to pull back on the marketing spend. As long as the marketing investments you're making are having a direct impact on the prospective buyer’s journey, the nurturing of existing clients, and the continued visibility of the brand out in the marketplace, they are worth sustaining. Period. We saw far too many CEOs make knee-jerk cuts to marketing and sales activities in the pandemic, and that decision has negatively impacted their ability to take advantage of the economic rebound we’re currently experiencing. Don’t join their ranks.
This is especially true given the expectation that inflation will begin to dissipate in the second half of 2021. So, now's the time to make some wise investments in marketing as well as sales. With the economy rebounding, every business owner should be taking an aggressive posture when it comes to driving and growing revenue—even more so than during the first months of the early rebound from the pandemic.
A vital piece of information that ITR shares in its Monthly Trends report is an overview of the core U.S. economy at a glance. Of the six different markets that have the greatest direct impact on the core U.S. economy, all of them are trending in a recovery or accelerating growth phase. What this means is the economy is rebounding, and by the end of 2021, all six of those core markets will be in an accelerating growth mode. All six!
So what’s the takeaway for an individual business owner? The U.S. economy is highly favorable. That's the answer.
Now – before simply injecting a wad of corporate cash into marketing and sales initiatives, I have one other challenge to throw down. Though the current state is compelling, it’s still critical to have a handle on the historic economic health of your company.
In previous blogs, I have endorsed a two-phased diagnostic process recommended by ITR, which includes a long-term 12-month analysis, as well as a three-month short-term gauge. Let’s start with the 12/12 rate of change. This is a lagging indicator, and by computing it, a business owner will know, at a glance, whether they are in one of four growth phases -- a recovery phase, accelerating growth mode, slowing growth phase or a recession. The same is true for the markets in which a business competes but again, the key U.S. markets are very favorable at present.
The second measure is to consider the 3/12 rate of change -- a leading indicator. The 3/12 is basically a forecaster -- a bit of a crystal ball. It tells a business owner what direction his or her company is going in. Are revenues moving up? Are they slowing, or are they moving down?
Having this sort of insight makes a big difference in planning the right marketing and sales strategies and tactics to grow your business. Whether or not you're directly affected by inflation, you should focus on effective programs that will resonate with buyers and prospects alike. In times of high inflation and a slowing economy, it is always wise to tighten the belt a bit -- spending on only the most important tactics that address these things.
My advice right now is to focus on growth and make smart investments. Build a solid go-to-market plan that's based on the sort of insights that I've talked about in this blog -- in particular the economic health of your company -- and the economic condition of the markets in which you compete.
For more information on this, I would recommend you access the ITR Economics Monthly Trends report, or feel free to reach out to me for a chat.