How To Make Money Online During The Recession

For several weeks now, we've been hit by a barrage of terrible economic news. The word "recession" is being bandied about more and more.

At least one friend of mine reports that all of his websites experienced a 70% drop in sales in January and February. Which would lead many business owners, both online and off, running for cover.

In fact, conventional wisdom for recessions (or serious economic downturns, whether they meet the technical criteria to be called a "recession" or not) is merely to survive. Don't try to profit or expand during times like these, the pontificators will tell you. It's impossible. Your customers are broke, and too focused on paying bills and making ends meet to buy the things you're selling.

But that, as Colonel Potter (my favorite character from M*A*S*H*) would say, is "Horse hockey!"

The video to the right is an outrageous example of the media hype that has the potential to frighten business owners into their "recession" bunkers.

Why on earth would anyone want to try to sell things when all of America is one payment away from living like this?

Well, it might help to know the truth. Truth that's pretty easy to dig up if you, unlike your average reporter, are willing to look.

The "tent city" in this video was started by the city of Ontario, CA in July of 2007 to benefit its local homeless population. At that time, said population was estimated to be around 140.

These are the chronically homeless, the ones who will essentially always be among us for a variety of reasons.

Word quickly spread about the freebies being offered residents of Tent City, and so it began to grow as homeless types from all over the country raced to get on board the gravy train.

As late as December 2007, Reuters did a story on Tent City with a headline proclaiming it to be the result of economic woes and foreclosures. Yet even they had to admit, 3 paragraphs in, that none of the residents of Tent City were there due to foreclosures.

The BBC claims in this video that 60,000 homes were foreclosed "last month", and that these residents are the result of those foreclosures. They have "nowhere else to go" despite some of them having fairly decent RV's and family elsewhere.

The truth is that Tent City had 400 residents as of March 20, and the city of Ontario was taking steps to evict over half of them because they were nothing more than freeloaders who'd come from as far away as Connecticut and Florida for handouts. Not because they were victims of recent foreclosures.

Let's recap what is wrong with the economy: Lenders were too free with mortgages, and loaned people the money to buy more house than they could afford. Many did so with adjustable rate mortgages which came with artificially low introductory interest rates.

Two things happened at the same time: over-inflated housing prices began to decline, (meaning homes were worth less) and interest rates began to rise (meaning payments on ARMs went up.)

Suddenly, people now owed a payment they could no longer afford on a house that wasn't worth what they paid.

According to the Center for American Progress, 8.8 Million homeowners in the US currently owe more than their house is worth. And there were 900,000 foreclosures in progress during the last quarter of 2007.

These are record numbers to be sure. And for those roughly 10 million people, times are indeed desperate. (This is assuming that none of the 8.8 million homeowners who owe more than the house is worth has the ability or desire to simply keep making payments until the situation resolves itself -- either by their increased equity or by the natural cycle running it's course and their home increasing in value again.)

But there are over 218 Million adults in this country. Which means that there are over 200 Million people right now who aren't being directly affected by this crisis.

Those are the people you're trying to sell stuff to.

To be sure, the housing crisis has had a ripple effect. Banks are struggling, some have collapsed.

People have lost jobs. (Yet the overall unemployment rate has actually gone down, from 4.9% in January to 4.8% in February, remaining at record low numbers.)

Then there is the whole other matter of ridiculously high fuel prices.

So even though the majority of Americans (and most likely consumers in other nations as well) aren't personally headed for places like Tent City, money feels a whole lot tighter than it did just a few months ago.

Which means it's going to be that much harder to pry it away in exchange for your products and services.

Harder, but not impossible.

When money is tight, conventional wisdom says that consumers get bargain happy. The smart response is supposed to be lowering prices.

But the truth is it's no smarter now to compete on price than it was when the economy was booming.

Because what people really want when money is tight is value. They don't want the cheapest version if that means it's also the lowest quality. That simply isn't a wise use of money -- you've not saved anything if what you buy falls apart and you have to buy it again in a matter of weeks.

The same goes for services. If the cheapest option doesn't really do what it promises, or if it winds up costing more time or hassle, then it isn't the best value.

Even Wal-Mart, the epitome of the "low price leader" has seen this. They've begun offering higher-quality (and slightly more expensive) items right beside the traditional bargains. And it's working out fairly well for them.

The thing business owners must understand is that rather than cutting costs and prices to the bone, and trying to compete solely on price, they'll make more money by offering value.

When money is tight, consumers want to know they're making smart choices with what they have. They don't want the cheapest option - they want the best value.

Give it to them and you'll make more money -- online or off. And while your competitors are hiding out in their recession bunker, or making customers angry with cheap quality, you'll be rocketing to the top of your market.

The last recession to hit America was 2001. That time, the culprit was a combination of the "Tech Wreck" and September 11.

Spending on advertising during that recession dropped somewhere between 8% - 11%, depending on who's giving the figures. It dropped even sharper online -- some estimates are as high as 25% -- but that's due in part to the collapse in value of stocks like Amazon that sparked the recession to begin with.

But companies that retreated to the bunker to wait the recession out lived to regret the decision -- if they lived at all. Because when it was all over and the economy began to rebound, they'd lost market positions that some would never get back.

Which is why the single most important thing you can do right now is to invest in the most effective, highest-quality marketing you can possibly afford. There is money out there to be spent. But it's going to take better convincing to get people to spend it on your products or services.

Make sure your voice is heard loud, clear, and often. And make it convincing.

Right now, numbers are again down for traditional "old media" advertising -- print, TV and radio. No doubt this reflects the waning influence of these outlets as more and more of the world moves online.

Online advertising -- especially on social media sites like facebook and MySpace, is continuing to climb.

There are several important things you should take away from these facts:

• Much of "old media" advertising is eaten up with "branding" or "image building" messages that are a waste of time and money in a good economy. High quality direct-response style ads will not only stand out in these mediums, but are likely to be less costly right now due to waning demand

• The internet is the place to be. Invest in the best quality website you can afford, and in the most persuasive copy you can get.

• Build relationships with your customers through autoresponders, videos, forums and conversations on your website

• Develop a presence on social media sites like facebook, MySpace, HubPages and more that bring added value to your potential customers and deepen those relationships. A good social media strategy can bring tidal waves of quality traffic to your website for a fraction of the cost of PPC

Bottom line: Provide value to your customers. And let them know about it in every way possible.

If you'd like more advice on making money during the recession, I've got two great resources for you.

First, I cover this topic regularly on my blog, "Lisa Packer's Internet Marketing Blog."

Second, I've created a FREE report (I'm not even asking for your email address) titled, How To Profit During The Recession. It's 15 pages of pure content that you can distribute as freely as you'd like. Give it away to clients, to people who optin to your email lists -- however you feel it will benefit you.

You can get your copy now on my blog, or you can click the link above to download it now.