In times of economic duress businesses close, people lose their jobs and there is a climate of fear.

The three most common reactions to a downturn in the economy are freeze, flee and fight. During the freeze period, spending is down. Then there is massive exit for those who see no way around the problems. The last category is; stay and fight it out – but strategically. Which is what this article is about.

Businesses can learn from a weak economy, and I’m going to address what we can learn in two categories. First a quick look at what products and services have proven recession proof in the past. This theme I’m calling “When reality bites, bite back.” Second I’ll touch on skills and attitudes required by business leaders to get out of the red and into the black. This section is called, “Urgency and action”.

Part 1: When reality bites, bite back

Beer and lipstick? Products that sell in a downturn

You may have heard people say that when the economy goes down, sales of beer and lipstick go up. This became urban legend after Estée Lauder, claimed the company’s lipstick sales rose significantly after the 9/11 attacks in the USA. The CEO even claimed that there was a lipstick index to predict economic rise and fall. The theory is that small luxury items are attractive to consumers when they are under financial pressure. “Small pleasures” and “little luxuries” help people stay hopeful in hard times.

The Economist magazine does not agree that there is sufficient evidence on the lipstick sales question, but does agree that beauty products generally sell well in tough times. Not to be daunted, Estée Lauder is now concentrating on building a nail polish index based on a 65% increase in nail polish sales since 2009. Apparently “nail polish is the new lipstick”.

Another take on this is that when times are tough, survival of the species instinct kicks in. So according to a team of social psychologists with the Journal of Personality and social Psychology, women’s mating behaviours show strong efforts to appear more attractive when the environment seems more uncertain, which would explain increase of beauty product sales generally in a weak economy.

Now let’s look at the beer sales question. CNN Money reports that alcohol sales usually increase particularly in wine, spirits and craft beer categories. A number of articles citing alcohol sales statistics around the world indicate that although some products gain or lose popularity, even in a flat out recession, overall alcohol sales go up between 2% and 10%. So although beer sales specifically are not a recession index, alcohol sales appear to be recession proof.

Lipstick and beer aside, let’s cut to what other products sell in weak economies:

• Candy
• Chocolates
• Fast food
• Donuts
• Pets
• Yoga
• Lottery tickets
• Generic drugs
• Vegetable seeds
• Condoms and contraceptives
• Romance novels

So what’s the message behind this – if the economy is sluggish sell products that attract mates, prevent children being born, increase pet populations and promote addictions? No wait – human beings are more than that -­‐ there’s more!

Services that sell in a downturn

There are some important service considerations to remember in a low economic climate too. The kinds of services people always need are related to: being born, staying alive, getting out of debt or selling properties, maintaining and repairing stuff, education and healthcare -­‐ and in this day and age – digital and software services. Finally everyone dies, so there is an ongoing business opportunity there too, even if it feels morbid to think about it. Here are some key services that over time have shown themselves to be recession proof:

• Laundry services
• Pet services
• Education: particularly colleges
• Training: particularly management
• Junk removal
• Repossession and recovery
• Funeral homes and undertakers
• Alternative health
• Tax services
• Bankruptcy law
• Insurance
• Accounting, bookkeeping, payroll
• Daycare and child care
• Computer/mobile repair and services
• General healthcare services
• Online security and security services generally

As you can see, there is quite a variety of services that can do well when the economy is down and your business can use both the products and the services that appear to be most recession proof as a benchmark. What can you do in your business that would correspond to some of these tried and true indicators?

Below, verified by over 10 different sites and databases on the topic, are the most “recession proof” products, services, businesses and jobs.

Part 2: Urgency and action

Changing your sales mentality

So let’s say you have already thought about honing your products and services and you just need to keep your nose to the grindstone and sell, but with more urgency.

Sean D’Souza says that in tough times people put off even basic needs purchases so we have to respond to their urgency with more urgency of our own. He gives a graphic example. Let’s say that you have to pee and are in desperate need of a place to take care of that problem. So the good sales person will help you with that issue, not by trying to sell a toilet but by dealing with your immediate need strategically. “You don’t want to use that dirty washroom with an old broken toilet, you want to use this clean toilet next to our toilet paper sales rack…”

Because people do not only respond to urgency, they also respond to safety and environment, even in a basic needs urgent situation. The sales strategy is based on -­‐ go pee, then pick up some toilet paper on your way out. You may then be thinking about fixing your slow flush toilet, and it goes on from there.

Roger Dooley of Neuroscience Marketing takes this idea a step further in the article “Selling to tightwads”:

Since tightwads have hyper-­‐sensitivity to buying pain, the perceived fairness of price and immediate price impact are key. Selling in tough times means getting in touch with your inner tightwad. And we are all tightwads when the money is low!

Tip number one: If you make the price a bargain you are more likely to get the sale. For example, “Membership is only $10 a month, which adds up to .33 a day!” instead of saying “Membership is $120 per year.”

Number two: avoid repeated pain – meaning multiple payment pain. For example, “Purchase once and never see it again on your statement.”

Number three: Don’t sell the good feelings, emphasize the practical benefits. For example, “Say goodbye to back pain and improve your productivity at work” instead of “Relax and enjoy, feel like a king.”

Number four: Use language that emphasizes the smallness of the payment, like “a small $5 fee” instead of “a $5 fee”.

Avoiding redundancy

To stay alive and prosper in business, however, requires not only selling with a different mentality, but paying attention to what you could be doing next.

Guy Kawasaki talked about this in a presentation I heard a year ago using the ice business as an example. A long time ago people discovered that you could save ice underground and use it all year round to keep things cool. This became an ice sales and home delivery business. But where do you keep those ice blocks in a home? This problem was solved by someone who thought ice boxes would be a great solution. Then someone else came up with the idea of manufacturing ice. But the ice manufacturers did not invent refrigerators – they were too busy manufacturing ice and worrying about their ice sales.

So a different entrepreneur invented with fridges. The point is that if you don’t pay attention to what should be the next logical step in your business then you could be among the bankrupt.

Leading your business in peacetime or wartime

According to Ben Horowitz there are two kinds of business environments: war time and peacetime. In peacetime, you want to encourage, build up, coach, improve incrementally and leave room for learning from mistakes. You convey optimism and focus on growth.

In wartime, you have to be aggressive, relentless and hit your targets dead center with one single bullet. You convey threats and focus on survival, because there is no room for mistakes. When the economy is bad, you are at war.

Horowitz advises that you, as the business leader, must win the war by concentrating most strongly on three things:

1. Tell the company story – articulate the vision.
2. Create strategies to reach goals – get others to execute on the vision
3. Focus on results – track your results towards clear benchmarks

Continuously communicating your story keeps everyone clear on why they are here and what the purpose is. “The story” motivates and inspires to keep going when there is little money, hope or tools to work with. The job of the CEO is to keep that vision and hope alive but with real urgency and honesty about what will go wrong if the company does not meet its goals and how everyone will be personally impacted.

Next people have to know what they are supposed to do with the vision. That’s the strategy part. Strategy speaks to job descriptions, roles and tasks. When people falter, take them back to the vision and ask how their job carries the vision forward.

Finally, you need to keep people accountable towards progress on the results. The parallel to that is to make sure they have the capacity to execute for results. Do they have the tools, skills, attitudes, and acumen to do their jobs? Is the company communication conducive to executing the strategies? Do they know why they are doing them?

To stay in aligned with these three goals, Horowitz explains there are two very important actions a CEO must take:

1. Train your top people yourself and
2. Hit the road for the top sale or top investor yourself.

That’s right, the important CEO must train top people, him or herself. Spending a few hours getting some materials ready to train the top people will empower the company to execute strategies and get to the results much faster than leaving people to struggle with their own frustrations. Horowitz says that CEOs who do not train their top people because they do not have time, is the equivalent of saying you are too hungry to eat.

If the very front line McDonalds worker gets trained, why wouldn’t your top managers get at least that much input into their capacity building? The return on investment is at least 10 times what the CEO will put into it.

The next focus is to remember that as the company leader you are the most influential sales person. You are the person to talk to the highest bidder, to find the big ticket item or to convince an investor or bank to kick in some capital.

If you are in the C-­‐level or upper level of an organization, training and selling to the top are in the title of your job description, especially during wartime.

Staying practical

Keeping yourself focused during tough times and not succumbing to your own fears can be a feat in itself. Remember to watch the road, not the wall. Keep your eye on the goal and steer your plough towards it. In business this means stop focusing on your declining cash flow line and increase focus on reaching sales targets.

Omar Periu has a few final tips to help make this advice practical:

1. Deflect your own fear: listen to and read about best business and inspirational topics instead of focusing obsessively on the bad news.
2. Get on the offensive. Use multiple points of contact and create more new opportunities.
3. Build new pricing options so it is easier for customers to buy.
4. Re-­‐prioritize your opportunities based on likelihood to buy now.
5. Network, network, network. Call your best customers and ask for referrals, attend one new networking event a week.

Let’s wrap this up

So here it all is in a nutshell.

???? To survive and prosper your business in tough times, look at what products and services sell when people have less money. Think of your version of lipstick and beer.

???? To sell in a tight economy learn to “think like a tightwad” and up the urgency and environment in which people will most likely respond. Make sure your toilet is next to the toilet paper sales rack and avoid price pain points.

???? Avoid redundancy by thinking about where the business should go next -­‐ remember the ice seller to refrigerator example.

???? A weak economy requires a wartime CEO. Tell the story, get others to execute the strategy and focus on results.

???? Keep yourself sane by diverting your fear with positive and inspiring thoughts, aggressively pursuing new opportunities and lots of networking.

Many businesses succeed in tough times. Tell yourself you are one of them and focus on the road ahead. Live long and prosper.