How to Catch the Falling Demand Knife

Welcome to a very special episode of Lochhead on Marketing, where we talk about how to make money in a recession. In times that are challenging, one of the greatest things we all can do is contribute what we can contribute. Given that it looks like we're about to be in a recession, what Eddie Yoon Nicolas Cole, and I aka the Category Pirates decided to do was to write a new mini book newsletter. It’s called How To Make Money In A Recession: Five steps to create demand for your product, service or platform. We elected to make the written version of this free. There'll be a link to it at the end of this show notes. So consider this episode, a mini book audio read.   We are in a Recession Dear Friend, Subscriber, and Category Pirate, We are in a recession. (Not officially, but it is not looking good.) Stocks are down. Startup valuations have plummeted. Bitcoin and Ethereum have lost more than 50% of their total value since their respective highs back in November, 2021. And sentiment around Silicon Valley is that the next 12-18 months are going to be challenging for companies looking to raise money. But where there is chaos, there is opportunity. Approximately 10% of companies get stronger in downturns. And you can’t be in the 10% unless you do some serious thinking. Through the category lens, downturns are simple to understand—and have a clear path to navigate. When times get tough, businesses, governments, households, and individuals all do the same thing: they create two lists. “Must Haves”“Nice To Haves” Then they start cutting the “Nice To Haves” to lower costs—as a direct response to their revenue / income / buying power shrinking.   The Question Every Business Should Ask Which means the seminal question is: what makes people put some categories/brands/products on the “Must Have” list versus the “Nice To Have” list?  Perceived value. (Everything we value, we’ve been taught to value.)  The difference between a dumb idea and a great one, or the difference between useful products and useless ones is the perception we have based on what we have been taught. (Don’t forget: pet rocks used to be in demand.) The trick is to get your product/service/platform on the “Must Have” list, and to be as high up on the list as possible. Because the higher the category is on the hierarchy of perceived value in the consumer’s mind, the greater the likelihood they will keep buying from you. Which is why savvy leaders market the category in downturns. Because people make their lists by category first, and brand second.   The Net-Positive Effects of Recession Elon Musk was a guest on the All In podcast and summarized the net-positive effects of recessions well: “Recessions are not necessarily a bad thing. I’ve been through a few of them. What tends to happen, if you have a boom that goes on for too long, you get misallocation of capital. It starts raining money on fools, basically. Any dumb thing gets money. At some point, it gets out of control… and the bullshit companies go bankrupt and the ones that are building useful products are prosperous.”  When most people hear the word “recession,” they imagine the housing crisis of 2008 or the dot-com bubble in the late 90s—and all of the businesses that went under as a result. But what doesn’t get talked about enough are the incredible companies that emerged out of these challenging times as well. Google and Amazon both came out of the dot-com bubble in the 90s (as did hundreds of other world-changing companies). And Uber, Spotify, Airbnb, Square, and dozens of other next-gen technology companies were founded between 2006 and 2009, right in the middle of the greatest financial crisis to ever threaten America. Recessions are pressure-cookers that rid the system of businesses failing to live up to the value they are promising society. To hear more on how you can make money even during a recession, download and listen to this episode.   Bio Christopher Lochhead    Links