Monday, February 16, 2009

An Unstimulating Stimulus

Congress has passed a Stimulus plan. It is supposed to revive the economy and reduce unemployment by inducing people to buy more than they otherwise would in these lean times. The plan is a mixture of tax cuts and federal spending. Together they will provide more money to many consumers.

To my knowledge no marketers were consulted in assembling the stimulus, yet getting folks to buy is what we do. As a marketing strategy this Stimulus is, at best, incomplete. There are no specific incentives for consumers or businesses to spend their additional funds. Thus some will be saved, some wasted, and the rest spent.

The cumulative effects of the Stimulus related spending, do not seem to have been rigorously modeled. The desired outcome of 3.5 million jobs "saved or created" thus seems quite arbitrary. In this respect the Stimulus resembles many marketing plans we see. That is - wishful thinking.

Interestingly saving 3.5 million jobs at cost of $787 billion is about $ 225 thousand per job. This seems no bargain, even if the Stimulus works as hoped. Considering the lack of specific incentives to increase spending, this seems optimistic.

What would marketers do? Faced with flagging demand, we might:

  • Have a sale
  • Change the business or pricing model
  • Offer incentives - buy 2 get the 3rd free
  • Provide cross promotions
  • or premiums
  • Give warranties or guarantees
  • Strive to better understand the buying and adoption process and address causes for not buying
  • Solidify and reinforce the value proposition
There are analogous features, which could be part of a stimulus package.

  • Sales tax holidays – specifically reimbursement to states, which hold sales tax holidays, for lost revenue.
  • Targeted tax credits for individuals such as for cars, homes, and investment tax credits for businesses.
  • Subsidizing mortgage interest rates to boost housing demand and liquidity.
Doubtless, you can formulate your own list. My point is that marketing oriented programs will increase demand more than doling out money and hoping or the best.

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