Sixty-four thousand Americans have lost their lives. Thirty million Americans have lost their jobs. GDP is projected to decline 40% in the second quarter, the worst economic performance in U.S. history. And yet, there are positive signs.
Social distancing is working, and the curve is flattening. Some states are starting to open and there are hopeful signs that economic activity is picking up. So now, the big question is, “When will our economy recover?”
To answer this, I took a look back in history to the 2008-2009 Great Recession. One thing the Great Recession taught us is that the United States is a consumer-driven economy. When the consumer spends, our market grows. Consumer confidence (and spending) can lead us out of our current economic crisis. The consumer is king.
The Coronavirus crisis is unlike any other in recent history. We are living through a global health crisis that has triggered a global economic crisis. It really is unprecedented. Until our health crisis is resolved, our economic crisis will linger. Maslow’s famous ‘Hierarchy of Needs’ helps make the case for this argument.
According to Maslow, people are motivated by basic physiological, psychological, and self-fulfillment needs, with basic needs at the bottom of the pyramid taking precedence over all others. Until basic needs like food, shelter, health, and safety are met, people are unable and unwilling to move up to higher-order needs like belonging, self-esteem, prestige, and self-actualization. Higher-level needs require consumer confidence, which leads to consumer spending. Said a different way, until people feel confident and secure in their future, they will not start spending again.
This is exactly what happened during the Great Recession, when financial markets, banks, corporations, and entire industries teetered on the brink of collapse. Many people lost their life savings and their homes, and they responded in predictable ways. They returned to basics. They became more insular. They reduced spending and cancelled major purchases. They avoided debt and adopted a more value-oriented mindset. At the peak of the crisis in January 2009, just as Barack Obama was entering office, the U.S. Consumer Confidence Index was at its lowest point since the survey was created in 1967.
The good news is it only took about 18 months for the economy to recover. But, those 18 months had a lasting impact on consumer psychology. The Great Recession influenced an entire generation of Millennials who came of age during that time. Like frugal grandparents who lived through the Depression, people’s attitudes about saving and spending were permanently changed.
So what can brands do to kick-start the economy today? How can brands respond to today’s crisis-driven consumer sentiment? Connect with people. Feel their pain. Empathize with their feelings of dislocation, anxiety, and uncertainty. Build trust by showing people that you’re not trying to sell them ‘stuff’, but instead, you care deeply about their personal well-being. Appeal to basic human emotions. In whatever way works best for your brand, reassure people that you are part of the solution, not part of the problem, by being authentically committed to their health, safety, and security.
The consumer is king. And if history is any guide, the consumer will lead our economy back to health. To get there, brands should start at the bottom of Maslow’s pyramid, and do whatever they can to make people feel more confident and secure. When they do, economic recovery and a return to normalcy are not far behind.
By Lee Rafkin, Founder & CEO of Rafkin & Company.
Branding, marketing, and communications consultant based in New York. In addition to advising leading brands like Discovery Networks, Estée Lauder, Medtronic, Nestlé, and Pepsico, Rafkin has named and branded organizations like OUTFRONT, Geopath, and Boldsite Media. Learn more at rafkin.com and reach Lee at email@example.com.