Image courtesy of pink_raindrops.

While many of us are very optimistic that President-elect Obama will lead us out of this economic mess, it’s clear that we will start 2009 with rising unemployment and a continued slowdown of economic activity. Take steps to recession-proof your business.

Direct sales consultants may already be seeing a dramatic increase in team member sign-ups and inquiries about joining their company. Many people will be looking to replace lost income by starting a home business, and others will be thinking about adding a home business as insurance against a possible job loss. While adding team members is always worthwhile and can temporarily increase your income because of sales to new consultants, keep in mind that what drives direct sales income is sales.

But just when you need more sales, your customers, and your new recruits’ customers are likely to be cutting back on “extras” and spending just for necessities. Now is the time to identify and focus on marketing products that will sell despite customers’ shrinking budgets.

The Lipstick Theory, or lipstick effect, suggests that there is a category of products that will show increased sales during times of economic uncertainty. After the terrorist attacks in 2001, the chairman of Estée Lauder, Leonard Lauder, noticed that lipstick sales increased. He theorized that women were buying inexpensive indulgences like lipstick to treat themselves, instead of buying more extravagant luxuries like designer clothing or expensive jewelry. The Lipstick Theory remains unproven, and in fact, recent sales figures for lipstick suggest it’s not accurate, but I think there is merit in considering it when deciding what to sell during a recession.

In tough economic times, it stands to reason that people will at least cut back on spending for non-essentials. When we buy, we’ll be looking for lower priced alternatives for our purchases. During a recession or depression, the best positioned companies sell what economists refer to as “inferior goods” – products that people substitute for their favorites that they can no longer afford. The lipstick effect may in fact be due to “inferior product” substitutes for things that have been given up.

By focusing your promotions on your less expensive products and services, you may be able to sustain your direct sales income. Promote lipstick instead of spa treatments, costume jewelry instead of precious metals and stones, and toys and games to entertain the kids at home. Focus on budget meals and meal-stretching foods like pasta and rice. Teach your customers how to accessorize to make an outfit look new without actually buying a new dress.

Anything related to frugal living and do-it-yourself should be popular. Re-using and re-purposing household items saves money. People will be looking for coupons, discounts, and money back guarantees.

By thinking about how people spend and what they do to try to save during hard economic times, you can focus your marketing and continue to contribute to your family income.

You might also like these posts:

• More Consultants, but Not More Sales
• What To Sell During a Recession
• How to Choose a Direct Sales Company During a Recession