by Peter Wolf.

Peter Wolf

Ultimately, everyone has felt its impact. It's being called the largest "financial crisis" in modern history. I won’t go into who’s fault it is, (it wouldn’t change a damn thing either) but it’s safe to say that a few very greedy people have screwed it up for pretty much everyone else, including themselves in some cases.

There is a saying, which goes, "It’s not about what happens in life, it’s about what you do when it happens." I think that sums it up, nicely. The question is, of course, is "What can we do?"

The music industry has not been excluded from the financial debacle. In fact, it’s one of the industries that reacts with a little more sensitivity during difficult economical situations than many other sectors. The impact is usually more acute than "commodity product" industries.

People are still going to need to eat and for the most part continue to go on with their lives, if they’re lucky enough to keep their jobs. They still have to heat their houses and put their children through school, and most people still plan to have a vacation at some point, whether it’s sooner or later. However, some previously planned personal or even business investments and expenses will be re-considered when times are tough. And those more discretionary money decisions are the ones that affect our industry.

When money's tight, people spend less money. We usually call this a period with a "bad economy," or an "economic downturn." Essentially, this means that everyone is spending less money than during more robust economic phases.

When people spend less money, prices are spiraling downward, and profits with them. The simple rule of "supply and demand," kicks back in certain products and services that have been successful in good times, suddenly head south. All of us think twice before spending and decide whether we need to buy something now or whether it can wait. This simple thought process has dramatic consequences on companies, industries or the economy as a whole.

The recent development is also further impacted internationally by currency exchange rate swings. We're seeing swings like we've never experienced during the past 30 years. Most major currencies have lost value against the US-$ in the realm of up to 40%, in a very short period of time (10 weeks). This has far reaching consequences for importers, exporters, manufacturers, distributors, retailers and customers.

The good news is that consumers probably get the best deal for anything right now!

I remember several times of economic crisis since I’ve been part of the music industry, both as an owner of retail stores and distribution companies, as well as being employee in the music business. I remember how it felt when the phones stopped ringing and customers wouldn’t show up anymore, or when previously placed orders were suddenly refused.

Sales usually drop in retail stores first. Then, with a little delay, distributors and wholesalers feel the pain, before another short delay that impacts manufacturers. One thing I’ve learned growing up in a post-WWII environment in Germany was: "You shouldn’t spend more money than you make." Pretty much everybody is on a budget, whether we realize it in our daily endeavors or not. I've found that whenever this important rule is out of balance, problems occur.

It remains to be seen how far and deep this crisis will go and how it is going to impact individuals, industries and economies. But, it is safe to say that everyone is feeling it right now.

In difficult times people remember who treated them well in the past, who’s been fair, competent, who was reliable and supportive and who kept their promises.

For instance, recently I've getting between four and five phone calls a week from my local Audi dealer. The sales guy can't be very bright since he keeps calling my land line and always ends up speaking to my wife. Whether my wife doesn’t have enough time to get a word in to tell him he should call my cell phone or whether she likes talking to him, is unclear to me. But, I’m going to assume that the sales guy isn’t very good. Perhaps his boss is pressuring him. Some people lose their cool in difficult times and actually make their effectiveness worse.

Anyway, I bought my current car in 2004 and I have no intention of buying a new car right now. It’s not that I wouldn’t like a new car, but I thought I’d rather wait and see how things are going. Even if I was considering buying a new car, I certainly wouldn’t buy it at my local dealer, that's conveniently just around the corner from where I live. The main reason is that I was poorly treated about a year ago, when I was thinking about upgrading my 2001 A4 to a pre-owned, certified A6. Although I had purchased my A4 at this particular dealer, the sales guys treated me like I was a bum. I admit that I sometimes may look like a bum, especially to people who are not in the music business. But, I don't think I talk or act like one!

The money they offered for the car I had purchased at their dealership was a joke, but more importantly, the way I was treated was unprofessional enough for me to remember. If these guys were really good at what they do, they wouldn't just think of me as a sales call opportunity in their data base, but as a valued customer at all times. If they did that, then I'm sure I could be persuaded to consider a new vehicle, even right now.

People always remember good service, helpful sales personnel, and competence. We remember when somebody goes that "extra mile." That can make the difference between having an empty cash register or having made reasonable sales by the end of the day.

The other things people remember in tough financial times are value and strong brands. Strong, high quality brands always do better in tough times. People are more likely to spend money for a product that has a very good reputation. A strong brand name has durability and offers the likelihood of getting and maintaining more value, something especially important in case the buyer decides to sell it at a later time. No name or generic-type brands suffer most in economical down times. They are the first products people pass on, unless they have a unique selling proposition or are technically advanced. If not, people will always go for high quality and solid reputation. It may surprise you, but people oftentimes intentionally buy things to help companies or brands out when times are rough. I do it all the time and I’m sure I’m not the only one.

Finally, something called a "war chest" is helpful when things get tough. It basically means we should put some money away in good times, so that we can survive slower sales periods, like we're experiencing today. In my opinion, this is true for individuals, families, companies and even corporations and governments. We should never expose ourselves completely and our "war chest" can help save the day.That’s another little lesson I learned when I was a kid. It has always worked for me.

All the best ~

Peter