It’s not over yet, says Hermann Simon

Hermann SimonIt’s all over then? Economists certainly think so. Data published by the National Institute for Economic and Social Research, a think tank, suggest the recession ended in May. There’s plenty of circumstantial evidence as well. House prices are apparently stabilising and the City seems to have been gripped with merger fever as the FTSE 100 brushes 5000 for the first time since Lehman’s collapse last year.

Not everyone agrees, however. One eminent dissenter, whom I met this week, is Hermann Simon, co-founder of international strategy and marketing consultancy Simon-Kucher & Partners. He’s not impressed by the uptick in economic activity and warns of a ‘W-shaped’ – or double-dip  – recession. In his opinion, a lot of credit failures have yet to materialise. He’s also suspicious of the economic statistics coming out of China. Exports are 40% of China’s GDP – and in June they dipped 26%. The state says it will make up the deficit from internal growth, but Simon is not convinced.

“There’s no easy way out of this recession,” he says. “We won’t get back to where we were merely by cost-side solutions. What we need are revenue-side solutions.”

Handily enough, he has some; 33 in fact, which form the core of his new book Beat the Crisis – 33 Quick Solutions for Your Company. That’s too many to enumerate here. But the gist is, whatever you do, don’t get involved in slashing prices because of a reduction in demand. By all means offer added value, as Hyundai did in the USA with its 3-month guarantee against job loss, or give a discount on bundled products, but don’t cut the price of individual items. One arresting example of  price support is the champagne industry. In 2008, it sold 340 million bottles of French bubbly. This year, it reckons on selling only 260 million, so it has taken the extraordinary step of destroying excess volume. Simon says this has worked. Prices have remained stable, despite champagne being a luxury, discretionary item associated with the good times.

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