Preparing for the economic rebound

June 2009

Having been through five economic downturns which included three technical recessions, I can confidently predict a robust recovery will follow this current recession.

After my first recession in 1974 I realised each recession provides opportunities to gain market share at a very affordable price. Securing an increased market share during a recession relies on early preparation and implementation of a plan to get more of a shrinking market.

Responding too late puts at risk customers and could leave you stranded at the starting gate when the economy inevitably rebounds. Getting your business ‘battle hardened' early in the cycle also lays the foundation for future growth opportunities. While bunkering down for the duration, a common practice during recessions, exposes your business to more aggressive competitors.

After Paul Keating's ‘recession we had to have' economic growth leapt 1.7% the following year, a huge turnaround but not dissimilar to what generally follows most economic downturns.

Every recession is preceded by an economic slowdown of some sort often with differing characteristics. For example the 1974 recession was stimulated by a build up of unsustainable wage demands from an aggressive trade union movement, followed by a sharp increase in world oil prices. In 1982 it was the collapse of a resource boom and high inflation. A global share market crash preceded the 1991 recession aided and abetted by financial institutions substantially reducing their loan exposure to businesses, followed by soaring interest rates.

A global financial crisis activated by subprime mortgage failures causing a near meltdown of banking systems stimulated this current recession. Governments and central banks quickly intervened guaranteeing deposits and recapitalising banks but it didn't prevent some major financial institutions and a number of very large corporations in the United States and Europe from failing. Unemployment now becomes the crucial factor that will ultimately determine the length of this recession. Because of its uniqueness, many claim it to be the worst recession since the Great Depression. As serious as it is, I suspect this is an overreaction largely driven by mass media fanning the flames of economic uncertainty.

Nevertheless, while each recession has its own unique characteristics the outcomes are pretty similar. Certainty is the first casualty of a powerful economic downturn. Banks restrict credit, consumers look for ways to reduce expenditure, businesses cut their workforce. Unemployment grows, and the fear of job losses leads to a reluctance to spend on anything other than necessities. So it becomes a vicious circle, almost a self fulfilling prophecy, until we hit rock bottom then, historically, something amazing happens as a few green shoots appear on the horizon. Entrepreneurs leap into action and begin taking risks again, banks loosen credit, people in jobs feel more secure and start spending on non discretionary items. And the growth cycle begins once again.


In 1973 the first sign of an economic downturn appeared at a critical time for the Budget Rent a Car System. Being the youngest operator in the industry Budget was actively engaged in building a national system to compete against the established car rental firms. Since inception in 1965 it had been vigorously adding new offices to its network around the country, and many were still unprofitable when the 74' recession hit.

Having had no previous experience with an economic slowdown of this magnitude, we thought the best thing to do was to get more from a shrinking market. We began by reviewing every element of the business. Returning to the basics and determining whether or not we were still meeting customer expectations. This included reviewing service delivery, cost centres, systems and processes and most importantly cash flow management. Each employee's performance was re-assessed; employment and training programmes were reviewed and modified as deemed necessary.

It soon became evident our customer data base was inadequate. Customer profiles and demographics were out of date; their reasons for choosing Budget and what they expected from us needed to be researched. We carried out extensive quantitative and qualitative research while helpful still left critical gaps in our knowledge base, as it was all too impersonal. So in late 1973 as the economy rapidly moved into recession, we launched a programme that would define Budget as the most customer centric rental car company in Australia. It required all executives, (including myself) department heads and managers to work one day every month in one of our rental offices, exposing us to customers and employees both of whom helped us fill in the gaps needed to reshape the business and run it to the satisfaction of customers. So successful was this programme, it became a permanent fixture and was maintained throughout my 25 years as CEO of Budget.

Knowing more about customers and their needs enabled us to also redesign marketing programmes to entice existing rental car users to choose Budget. Value was the foremost statement, but it was backed up by projecting an image of a very different business, featuring a team of people who were clearly having fun and enjoyed what they were doing. The campaign was run under the umbrella of our CAN DO slogan emphasising nothing is too much trouble when it comes to customer satisfaction. For television we created a series of humorous advertisements designed not only to attract more of an existing market, but also expand the total industry. Special Packages like ‘Plan Ahead' (pay 30 days in advance and get a 30% discount) helped with cash flow, while offering customer value. The mix of commercials also included a service proposition that said "if we don't answer the telephone within 5 rings, we will reduce your rental cost by $5.00".

This promotional campaign achieved immediate success probably helped by competitors who typically reduced their advertising expenditure because of the recession. The extra business generated from this campaign also allowed us to considerably increase advertising expenditure.

All in all, Budget came out of the 74' recession with great momentum. Market share had increased by 5 or 6 points, and importantly more people were exposed to the experience of hiring personal transport.

The experience of working a day each month behind the rental counter opened up many new ideas for our management team on ways to further build the business and how to do it even better. It also caused us to look carefully at critical business relationships and how to effectively nurture each of them to the benefit of Budget. We identified the four key business relationships as; EMPLOYEES-CUSTOMERS-SUPPLIERS and COMMUNITY.

EMPLOYEES; if you don't have the right relationship with employees you can forget about the other relationships because without employee commitment it's impossible to nurture the others.

As both CEO and marketing director of Budget during the 70's, I always considered employees as my primary market thus a good deal of my time was devoted to fostering a close and personal relationship with every employee.

I looked for innovative ways to market the company, its objectives and values to each employee. The most effective ongoing form of communication turned out to be a personal letter from me, sent monthly to every employee, briefing them on the our overall performance, including general information about Budget and the general car rental industry.

As employees were considered to be extended family, policies effecting them were filtered through the prism of a family unit. Were they a brother, sister or nephew, how would they respond to this new policy or directive. Like any family unit, all employees would receive a birthday or anniversary card and an appropriate Christmas gift from both my wife and me every year. We also introduced health and fitness programs to further reflect our concern about the health and welfare of employees.

CUSTOMERS; we are in business to create a customer then satisfy the needs of that customer. To succeed with this objective it means running the business to suit the customer. Every product, policy, system and service needs to be predicated on this principal. Customer Service is simply the process, if done well it leads to Satisfaction with the reward being Retention.


SUPPLIERS; Are frequently overlooked by business management but you do so at your peril. In Budget we worked hard to develop a close relationship with all major suppliers. They would be invited to our conferences, attend promotional functions, receive monthly newsletters and in general kept appraised of our aspirations, successes and failures. It paid dividends in spades for we could depend on suppliers to move quickly to support our requirements when opportunities arose.

COMMUNITIES; although we became a major international company with operations in 20 counties including Japan and the UK and over 300 locations in Australia, we always thought locally. Managers were encouraged to become identities in their respective communities by building a public profile through joining service clubs, supporting charities and sporting teams. They frequently became a spokesperson for the car rental, or travel industry in their particular region.


There were indications of an economic downturn in early 79' and although Budget had used the previous recession to expand its market share it was still much smaller than then market leader Avis. Because of an extraordinary contract with the Commonwealth government Avis had enjoyed exclusive operating rights at all Commonwealth Airports for over 30 years, they were in an unassailable position as market leader with over 50% of the car rental market.

Following 10 years of aggressive lobbying by Budget the federal government finally decided to call tenders for a new airport car rental supply contract allowing up to three operators on Commonwealth Airports. In July of 1979 Budget along with Hertz won the rights to all 56 airports, Avis acquired only 22 with the remaining slots split amongst several smaller operators.

It was estimated only 6% of the Australian population had used rental cars at the time of the expanded airport contract. This small market penetration was a consequence of the Time & Mileage pricing policy of the industry. The renter had to estimate the cost of hiring a car, by guessing the number of kilometres he or she would travel. The more kilometres travelled the higher the cost, which was a turn off for the average consumer.

The day before the new airport car rental contract came into effect, Budget launched a national television campaign offering for the first time ever, a Flat Rate inclusive of time and mileage under the slogan of ‘Budget Drives Your Dollar Further'. Over that weekend it was estimated three quarters of the Australian population saw the advertisements which was to forever change the nature of the car rental industry.

The concept for a Flat Rate rental system came from our customers who had for years been saying they wanted a simplified system where the costs were known in advance. Unfortunately we were not in a position to provide it until we had access to the total market which included Airports. The outcome of this new rate structure provided momentum for the car rental industry to grow significantly during the 82' recession. By the time it concluded Budget had increased its market share to over 50% replacing Avis as the market leader. But of equal importance, the percentage of the population renting cars increased from 6% to nearly 20% as a consequence of Flat Rate.


THIS CASE STUDY would be incomplete without including the impact of the 87' share market crash on Budget. In October of that year Budget was market leader in a vastly expanded car rental market. It had 12,000 rental vehicles and 8,000 lease cars in its fleet. Its market share exceeded 50% of the total car rental market. The BUDGET BRAND was amongst the most recognisable in Australia. The Company had spread its risks, by expanding into 20 other countries including the UK and Japan, although at the time, only a hand full were contributing to corporate profitability as most were still in the establishment phase.

I was soon to discover the business we had so painstakingly put together over the past 23 years was vulnerable to forces beyond our control.

The 1987 share market crash in itself was not of great concern to Budget as we were a private company, however, what followed could only be described as the "perfect storm' or perhaps more precisely, ‘Murphy's Law'. ("Anything that can go wrong will go wrong.")

Firstly, the Crash of 87' created uncertainty in the market place, banks immediately moved to reduce their loan exposure, interest rates exploded reaching levels of 20% for most of 1989. Budget had survived high interest rates before and could again but in late 1988 air traffic controllers launched a major campaign to improve wages and conditions. Air travel was disrupted over the ensuing months effecting airlines and car rental companies alike. Little did we know this was the tip of the iceberg for shortly thereafter the Australian Federation of Air Pilots also embarked on a campaign to further disrupt air services, ultimately leading to a showdown with the federal government that ended up being a fight to the finish of the Pilot's Federation. It lasted longer than most believed possible causing significant disruption throughout most of 1989.

For several months the only air travel between major centres was on RAAF aircraft. For Budget it was devastating, as we had cars sitting idle all around the country generating no revenue. By the end of 89' it was clear I could no longer fund the losses and the American Budget Car Rental Company was invited to absorb the Australian network into their system.

I turned over my keys and departed the company on Christmas Eve 1989 with disappointment but with the satisfaction of knowing Budget would survive me largely because of its powerful culture, its Brand and Can Do spirit. We had fought our way through two recessions and on both occasions strengthened the business by taking calculated risks, but this time we were snookered by events outside the parameters of a standard recession.

Finally, when it comes to recessions I'm reminded of an observation made by former US President Harry Truman, who said; "The only thing new in the world is the history you haven't read".


GET FIT: Take up a form of aerobic exercise like jogging, swimming or cycling. Go to the gym. Improve your diet. Get adequate sleep. An economic crisis is a marathon not a sprint. You and your team need to prepare accordingly.

COMUNICATE-COMUNICATE-COMUNICATE: the more employees, customers and suppliers know the more they are able to help. Be visible; lead from the front; exude confidence; be first in the office each morning and last to leave at night. Keep everyone informed on the company's progress.

BACK TO BASICS: Review every aspect of your business, particularly its culture. Eradicate unnecessary expenditure. Carefully examine Cash Flow forecasts and management systems. Conduct employee assessments, review employment policies and training programmes.

CUSTOMER SATISFACTION: Talk to your customers and find out what they want, and then develop products, services, systems and processes to give them what they want. Identify every customer contact and ensure each is a triumph. Anything less is unacceptable. Be very, very, good at what you do.

RELATIONSHIPS: Enhance the relationship you have with Employees - Customers -Suppliers and the Community in which you operate. You are in it for the long haul and will need support from them all.

SALES AND MARKETING: Look for a point of difference in the way you project your image. Seek to differentiate your business from others doing similar things. Be creative in the way you promote your products and services and be innovative with pricing policies.

ADD VALUE: Look for ways to surprise customers by giving them something that was UN-EXPECTED; UN-ADVERSTISED and UN-ASKED FOR. This can be as simple as a ‘hand written' thank you note.


Bob Ansett was interviewed recently on Sky News, on the Business Channel


Bob Ansett in the ABC-hosted debate on De-amalgamation, held on the Sunshine Coast.  Bob and 'Friends of Noosa' went on to win victory in a historic vote in March 2013 that saw a landslide 80% in favour.  Read more.