"Revenue is down" is not the whole story

Once again, you can call me captain obvious… but the first question one should ask when revenue is down is, “Where did it go?” In other words, is the spending ending? Or is it simply migrating to more attractive alternatives.

I read a good Marketing Daily story, recently, which encouraged us to think about the three stages of trading down.

First: Changing Channels. An example of changing channels might be when people migrate from restaurants (out-of-home dining) back to grocery stores (to support in-home dining) as a means of saving money… or move from the grocery to the club store for select product purchases.

Second: Changing Departments. That’s when someone might stay with the same grocer, for example, but move toward more private-label goods or make their choices based on what’s on sale.

Third: Changing Stores. Perhaps the consumer still dines out-of-home, but economics influences their decision as to which restaurant they’ll go to… or when the consumer is inspired to change from the premium grocer to the EDLP supermarket.

But enough about my book report. You can read the story for yourself by clicking here (Media Post Marketing Daily, May 18, 2009).

Implications: If revenue is down, don’t just lament the loss. Figure out where it went, and why. Often, the spending didn't end... it just moved.

If you’re looking for ways of making revenue go up, ask which competitors might be vulnerable in your category. But also, consider which new categories you could compete with (just as the grocery store competes with the restaurant down the street).

Mike Anderson