By  on April 28, 2009

Long-term survival might depend on brands and retailers rethinking the fundamentals of their relationships with consumers.

Manufacturing veteran, consultant and author David Birnbaum believes there are two distinct philosophies companies apply when they consider consumers. The recession is amplifying the failures of one of those approaches — the one that is unfortunately being followed by the majority of the industry, he said.

According to Birnbaum, two explanations are offered when products aren’t selling. The first is that the consumer isn’t buying what a brand or retailer is selling. The second is that brands and retailers aren’t selling what the consumer is buying. Birnbaum contends that 95 percent of the industry falls into the “they’re not buying what we’re selling” category — and the results aren’t promising.

The mind-set, said Birnbaum, leads to a predictable pattern. Companies, believing customers simply aren’t buying what they sell, look to outlast the recession and count on recouping sales when business picks up. Managing through the downturn means reducing orders, followed by further reductions, followed by markdowns. As that is going on, management seeks to improve margins by negotiating harder with suppliers and reducing other overhead.

The overall assumption being made in this circumstance is that the brand or retailer controls the market, that it knows what customers want. Getting consumers to pay more for less quality or value is inherent in this stance, according to Birnbaum.

“The underlying assumption is that the consumer’s a moron,” said Birnbaum. “I have to tell you that the average American may not be the smartest person to walk the face of the earth, but when it comes to buying — bunch of Nobel Prize winners.”

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