Commentary: Current Economic State Parallels Past Cycles

By Thomas P. Gale

January 25, 2010

More about: Economy

Recovery from the recession, if indeed that’s the proper term for what’s going on today, has turned out to be almost as dangerous and difficult as the recession itself. The traditional down-and-up cycle which distributors by time honored tradition have been programmed to expect just hasn’t happened this time around. Instead of the neat, sharp snap-back of pent-up demand, the re-hirings, the gearing up we’ve been conditioned to look for, there has been little, if any perceptible shift away from the cautious, tight-fisted buying policies evolved in the depths of the recession.

It is not a return to a sellers’ market we are seeing but rather the growth pains of a new kind of market with different values and tougher entry requirements.The old game of waiting for times to get better is no longer viable. It’s now a question of realizing times have changed and facing up to changed markets which will never be the same again.

The paragraphs above were written for the May 26, 1992, issue of MDM by then publisher Van Ness Philip. It is a little scary how parallel those thoughts are 18 years later. He also talked of how many customers “focus on price and, where sellers respond in kind, fierce and destructive price competition results. But many are also deeply concerned about quality; sellers can reach them on this wave length and re-direct the focus to total cost instead of price where they can prove that they bring value to the table.”

Many aspects of the business cycle don’t change. Some do. Distributors who realize real growth this year have to go beyond identifying customers’ new definition of value.

They have to walk a tightrope from the traditional cost model of one-size-fits-all to a new one, where there is a much better understanding – by all your employees – of how each customer segment is served and creates profit for the company.

Twenty years later profitability in this industry is still too defined by the 20 percent of customers who make up for the unprofitability of 80 percent of customers. Recessions tighten tolerances.

It’s not new that through a recession markets shrink and change dramatically, as the words above prove. But the reactions and investments in new models has to be swift. Those who adapt and invest in profitably serving their strong niche positions – with all the shifting customer values – gain share, no matter what decade.

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