The first five months of this year have seen an average price of just over USD$100 per barrel of crude oil. Some of the economist boffins are predicting prices of USD$200 a barrel by 2009. Obviously this kind of upward trend puts some nasty pressure on the pockets of consumers.

If we have a spending budget of 100% and the price of gas goes from 20% to 30% of our total spend, the effect can be calamitous. This monetary pressure has a domino effect on people and organizations who are vying for the consumer dollar, pound and peso. Typically the first goods and services to suffer in a time of financial squeeze are luxury goods and travel. Like the airlines aren’t finding it tough enough, they’re hit with the double whammy - oil prices and a cutback in consumer spending.

But what happens when consumers have made those first two cuts? What’s next? First on the agenda might/should be expenses relating to oil. Public transport patronage increases, sales of 4 cylinder cars increase, large cars are used less often, etc.

**As an aside, we’re big into Vespas around here: we love the style, the sound and the “la dolce vita” lifestyle. They’re cool, and miserly on gas to boot.**

Companies targeting consumers directly should keep in mind that the product and service offering now, more than ever, has to add value to the customers’ life. That doesn’t necessarily mean lowering prices, but it does mean that discretionary spending is down and buying for need is up. There is of course emotional purchasing, but that’s different again. Value adding doesn’t equate to giving things away for free either - consider convenience, efficiency and other non-tangible assets that you can include in your sale that adds value but doesn’t necessarily cost you much.

When we release 2Large2Email (our file sharing web app) next month you’ll see it isn’t just a way of moving files. There’s a whole lot more being offered to the customer and that will make the user experience even better. You can check it out now, but remember it’s not live just yet!

You can still succeed in a tight economy but you have to give your customers a reason to stick with you.