Businesses profit from unconventional spending decisions when customers stop buying

Scottsdale yogi Andrea Griego says the last quarter of 2009 wasn’t about serenity. For the first time, Griego’s typically well-attended Bikram Yoga Institute was eerily uncrowded. True, the growing paralysis of the U.S. economy was throwing people out of work and throttling consumer spending, but in 11 years, Griego’s yoga studio had seen nothing but growth.

“Panic never works, so I said, ‘How can I be creative?’” says Griego, a former Arizona Diamondbacks sales rep who relies on her yoga training to weather the setbacks of a fickle marketplace. She briefly cut a few classes and retail inventories to stem the financial run-off. But she also offered pricing deals to existing and new customers, getting the word out through her website, emails and Facebook. The quarter ended on an upward spiral, class sessions were restored to 34 per week and disaster was averted. “I’m not afraid to spend if it comes back, and it has,” Griego said. Namaste.

However, the farther away from the yoga sutras one gets, panic, or at least fear, is a larger part of the business environment where spending is concerned. The low consumer demand signaled by recent low Gross Domestic Product figures has scared some businesses from believing the economy is recovering, according to ASU economist Lee McPheters. “I think the main problem is uncertainty about how strong demand will be in 2011. There may be a fear that the current economy is propped up by government spending, tax cuts and temporary stimulus that will fade in 2012. There is not only mistrust of government, but also a belief the government policy is not effective, too strong or too weak,” says McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business.

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