One often overlooked fact in these tough economic times is this: as consumers are feeling the pinch in their wallets and cutting back on spending, the importance of effective marketing multiplies. In the current economic environment, many product markets have just as many advertisers (if not more) as there were two years ago; but these sellers are chasing fewer and fewer consumer dollars.

As consumers cut back, most businesses will see declines in sales and margins. The difference between the company that survives and the one that doesn’t will be the ability to focus in and earn the precious dollars that are being spent. Nearly anyone can make money when things are great, but times like these really seperate the strong performers from the weak. As we have already seen this year with the wave of retail bankruptcies, the companies that were underperformers during the good economic times, are not able to hold on any longer.

While times will be tough for most business owners, online or otherwise, the desire to survive the tough economic situation will help many businesses cut the fat and learn to really focus efforts and money on what counts. If your business is struggling, hang in there. Rather than worry and fear for your business, sieze the opportunity to become the best businessperson you can be and grow through the adversity. Good luck!

After hearing that the US unemployment rate was at a 5 year high and mortgage delinquencies were the highest in 29 years, my hopes for a near-term economic recovery were not very high. There was also news Friday of a meeting between US Treasury Secretary Hank Paulson and executives of Fannie Mae and Freddie Mac. The Bush administration is apparently near an announcement of a plan to prop up the two mortgage giants.

The government had already made it clear that it would step in to stop any failure at either company, so the announcement of an actual bailout will likely only bring bad news to a struggling economy. The economic struggles in the US are very real, but there is also a large psychological aspect to it, especially when considering consumer spending. Any major news (like a Fannie-Freddie Bailout) is going to make Americans further close up their wallets and reduce spending.

This is the reason that I mention stories like this on Profit Program Reviews, is that changes in consumer behavior results in changes in our market (affiliate marketing/sales). Given the glum look for any strong economic pickup this year, I expect a few types of products to outperform over the next few months.

As people feel less secure about their jobs and incomes, quality products that deal with working from home should sell well this year. I especially think that lower price-point products (ie less than $50) will do very well. People are going to look for cost-effective ways to diversify their income. Also, products dealing with debt relief and managing creditors will likely do well as more people fall behind on payments. In this category, I expect any informational product dealing with foreclosures and mortgages to be a star.

At the same time, there are some products that I expect to see significant declines in sales. Consumers and small businesses are afraid to lock themselves into large and/or long term purchases right now. Many online services offer significant savings for long-term signups of 6 months or a year. I expect that buyers will have a harder time swallowing these purchases and will opt to stick with month-to-month plans. For services like Wordtracker that are much more expensive on a month-to-month basis, I think they will really struggle without strong promotions. It would be in the best interest of these services to bring the effective costs of a month-to-month plan and a longer term plan, closer together. I’d try to focus your marketing on the products poised to do well in the down economy. Staying ahead of the trends can help keep your business thriving as the market shifts.

Concerns about the current financial and economic crises worsened on Friday when U.S. federal regulators siezed IndyMac Bank. This even marks the third largest bank failure in U.S. history and the largest in more than two decades.

IndyMac was one of the most active lenders during the housing boom and is now the largest to fail since home prices began to plunge last year. More bank failures are expected as home prices continue to decline.

The bank’s collapse is expected to cost the Federal Deposit Insurance Corp. (FDIC) between $4 billion and $8 billion, according to the Wall Street Journal. The loss could potentially wipe out more than 10% of the $53 billlion deposit-insurance fund.

In an interesting twist on the collapse, John Reich, the director of the Office of Thrift Supervision, is blaming IndyMac’s failure on Democrat Senator Charles Schumer of New York. The senator sent a letter to the regulator raising concerns about the bank’s solvency, leading to a $1.3 billion run on the bank.

IndyMac was one of the biggest lenders of the so-called “Alt-A” mortgages which often did not require borrowers to document their income and/or assets. As loan defaults began to pile up, the bank’s finances rapidly deteriorated. As of last week, the bank had approximately $19 billion in assets, nearly $1 billion of which were not insured by the FDIC.

The collapse will likely be felt across the entire banking industry. The FDIC could increase insurance fees to other banks to help re-build the deposit fund. If fees do go up, look for credit to continue to tighten as banks feel the pressure on profits.