Cutting Costs in a Recession Can do More Harm than Good

By
Services for Real Estate Pros with SimplifyEm

I read an excellent post in Monica O'Brien's "Resourceful Marketer" blog and I think everyone should check it out, "4 lessons from the food industry on how to make money in a recession – Hint: it’s not by cutting prices".

It’s too bad her insights can’t be found in textbooks! I think she had some really good advice that totally hitting the nail on the head. I agreed that cutting back in a recession is not always the way to go, and we can learn from other industries and apply that knowledge to our own.

Just the other day, I went to Home Depot - and it made me think about her post. Has anyone been to Home Depot lately? How do you think they are handling the recession?

I’m not sure how they are doing at the corporate level (had to shut down their Yardbirds and Expo Design Centers, etc), but this is what I noticed at the local HD I went to:
#1 Not Busy at all
#2 Way more sales associates than needed
#3 Everyone lined up, very nice, and ready to help

This was the first time I’ve ever gone to a Home Depot and WANTED to shop there. They were so helpful… and I bought so much stuff…

And it made me think - a person like me would normally avoid Home Depot (long lines, too many people, inconvenient, poor customer service, etc…) - and it is the current conditions at HD that is causing me to shop more there. I wonder how much this is the case for others… It wouldn’t surprise me if HD’s sales are up (in comparison to Lowes for example), because through employment of a better customer experience, HD is actually encouraging more sporadic spending from consumers.

Had Home Depot slashed its work force, I can’t imagine receiving the same level of service that I did, and I couldn’t see myself spending as much money as I did there. I think the average consumer would tend to have a similar reaction - and so in this case, it is clear to me that NOT cutting expenses (more layoffs) in a recession might actually be helping Home Depot survive.

Had I not read Monica's post before going to Home Depot, I probably would not have made the observations that I did – and so I thank her for her insights, because they get me to think about things differently!

Can’t wait to read her next post, and I definitely think you should all take a look!

Comments (4)

Monika Depalo
GAFF'S REFERRAL'S INC. - Port Orange, FL
REAL ESTATE Agent/Stager

Our Home Depot in Florida are more dumpy than Lowe's.

-Monika

May 07, 2009 10:50 AM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

Interesting observations ---- hope you got a lot of HD goodies --

May 07, 2009 04:38 PM
Chris Campbell
www.RealEstatePropertyForSaleGroup.com - International, IT

Interesting post. However, for most businesses, labour costs are the greatest burden during any kind of recession. Couple this to price cutting on already low margin products and it is difficult to see how nothing short of a significant increase in spend per reduced number of customers could turn a profit.

I am like you though, I prefer to shop without having to fight my way through the hordes and wait forever for the right person to come and answer my question. I do suspect the store really the existing staff on because it is not easy or cheap to get rid of them at least until they have decided how long the recession is likely to last.

Where I absolutely agree with you is that it is unwise to cutback on everything during a recession. Marketing is one of those areas IMO. With less customers available for the product you have to sell, it is important to become more focused, targetted and creative with the marketing budget. Its also worth remembering that even in a recession, people often look even if they don't buy. So if your marketing becomes more prominent by virtue of the fact that everyone else is pulling their's in - the brand awareness generated will stand a business in good stead when the recovery starts.

May 09, 2009 02:23 AM
Rich Rogala
Consistent Clients - Chicago, IL
Real Estate Marketing Coach

Interesting insights, and yes, you're probably correct that you wouldn't have noticed if it weren't for the original post! I imagine that it is increasing their sales a bit, just by providing a better customer experience than their competition.

May 11, 2009 02:42 AM