There are lots of contradictory reports about whether the economy is recovering or not – my advice is not to try to second guess what will happen but to make the most of opportunities as they arise.
If your competitors are cutting back the chances are their customers will become disaffected so be ready to show them that you are still doing a great job and will look after them.
Look out for talented people who have been ‘let go’ and work out a way to collaborate, associate or engage with them in joint ventures.
Expand your business by buying another one – there are lots of bargains to be had (and funding is still available for businesses with strong plans).
The temptation to cut prices should be resisted. You cannot turn yourself into a low cost business just by cutting prices – you need to have started out with this intention from the start and reflect it in everything you do. Ryanair has everything in place to operate as the cheapest in the market – that is why they can offer cheap prices and still make money. If your operating costs aren’t the cheapest and you cut prices all you’re doing is cutting your profit instead of making money.
Instead of cutting back, decide what makes your business attractive to customers and what keeps them coming back for more. This is very rarely the price.
If you are operating in a niche market exploit that for all its worth and resist the temptation to dilute what you offer by making it more generic. Luxury goods, for example, quickly lose their appeal it they can be bought anywhere at discounted prices or if ‘budget’ options are available.
The most successful businesses in a downturn look for differentiation. Identify what you do better than your competitors and make it even better. This may even involve a price INCREASE but as long as the perception is of increased VALUE it will work.
At the same time, manage your costs carefully and the result will be an increase in profits. Look at your ten most profitable customers (measure profit not revenue) and your ten least profitable. Are the profits accurate? Have you really taken into account everything (extra hours worked on emergencies, extra phone calls, postage etc)? Could you make more money by dropping the least profitable and spending time acquiring more high profit customers?
Remembering that, by definition, there is only room for ONE lowest cost business in any market, if that isn’t you, it makes sense to decide whether you are operating in a niche market or whether you will concentrate on differentiation and then – be consistent and make it unthinkable for customers to even consider going elsewhere.
Remember “The Goldilocks Principle”. Essentially, this means that if you have two offerings: small & large or cheap & expensive, most people will opt for the smallest & cheapest but if you have three offerings: small, medium and large or cheap, reasonable and expensive, most people will avoid the extremes and plump for the middle so the value of your sales goes up.
Starbucks is the prime example of this. When they added the ‘large’ cup of coffee to the exisiting small & regular, sales of small cups went down & sales of regular soared. Add to that the few extra sales of ‘large’ or ‘expensive’ & overall sales increase dramatically.
This is the essence of a talk from Alastair Dryburgh of Akenhurst Consultants to our Inspired Group.
