Five Myths Every Business Should Avoid to Survive the Economic Recovery
|Copyright 2014 by Virgo Publishing.|
|Posted on: 11/05/2010|
By Vivian Hairston Blade
At a recent stockholders meeting, the vice president of sales for a global manufacturer reported, “The economy has been tough on our industry. Sales volumes significantly declined and have not nearly returned to pre-recession levels. The company has laid off employees, cut expenses and, unfortunately, has had to cut prices to remain competitive. Competitors have cut prices as much as 40 percent on some products. We’re ‘underwater’ on critical components our customers need, but we have no choice.”
Sound familiar? Could this be your company?
Like so many businesses during the recent recession, this company is having a tough time bouncing back. Consumers’ wallets and businesses’ checkbooks continue to be tight. In fact, the Price Index for personal-consumption expenditures, excluding food and energy, bottomed out in late 2009, but is showing signs of being unstable again.
While sales and profit continue to struggle, employment will remain stagnant and the economy will be slow to recover. It’s a vicious cycle. Every company feels the trickle-down effect. Customers have reset their expectations, and companies attempt to cut price to retain customers, grow share and increase top-line revenue.
But is this really a viable business strategy? Focus on short-term revenue hinders investment in substantially improving the quality of your business for the future. Though not sustainable, many companies still operate on this short-term view.
Five Myths Every Business Must Avoid
It’s time for you to take a look at five common myths that keep companies “sprinting” to the finish line. If you want to survive the recovery, avoid these failed strategies to stay ahead in the marathon.
Myth 1: Customers demand lower prices during a recession. When customers stop buying, the first reaction is to drop prices to jumpstart spending. When price is the carrot, buying behavior changes and customers wait for even deeper cuts.
Myth 2: You have to follow competitor price moves during a recession to stay competitive. Competitors use price wars to protect share. You soon find that suffering profit can’t sustain the business for long. Rarely does volume make up for the loss in revenue!
Myth 3: We’re good at what we do. Customers are privileged to do business with us. Sorry to disappoint, but it’s not about you! Companies with this attitude find customers don’t stick around long.
Myth 4: Customer-retention initiatives are a cost that won’t pay back. Companies that treat customer retention as a cost will allocate only a few resources to protect their greatest asset. Their efforts fail to improve retention or increase sales and, therefore, support dwindles.
Myth 5: Customer retention is the responsibility of the sales and customer-service departments. Service recovery is not a customer-retention program. Only one out of every 19 unhappy customers complains. That’s just 5 percent. And of the 95 percent of unhappy customers who don’t even complain, more than two-thirds decide to buy elsewhere. Recovery as a retention strategy just doesn’t work!
A Look in the Mirror
Do any of these myths plague your company? Where do you feel the effects? Consider these questions:
Studies show when customers believe they get more “value” for their money, they’re much more loyal and spend more with those brands.
Companies that take a long-term view of investing in value-based customer relationships are rewarded with double-digit growth and profitability that compounds over time. Does this mean higher costs? More often, investing in value-based customer relationships means reducing your costs or charging more for highly valued products and services.
Value is about how you make your customers successful. Don’t forget that customers define value and expect you to deliver value, at a minimum, to meet their fundamental expectations if the relationship is to continue. Keep in mind a change in the economic climate causes the needs of your customers to change, which requires a change in how you respond to their needs.
How do you effectively deliver greater value in this tougher environment and remain profitable to survive the recovery? Integrate these value-creating imperatives into your business operation. As you review these brief descriptions, challenge your current thinking, culture and processes!
How well do you execute in each of these areas? How much value do your customers really feel? Each of these value-creating imperatives requires a discipline to become part of your organization’s DNA. These are critical to your success for improving your customer retention and making your business more profitable, no matter what the economic environment.
Be unequivocal about creating promoters who sing your praises—customers who know you are committed to their success and who are committed to yours.Vivian Hairston Blade is president & CEO of Experts in Growth Leadership Consulting LLC (EiGL). Through a combination of coaching and training, EiGL helps Fortune 1000 companies execute value-based strategies by building high performance, high quality and high service-level organizations. For more information, e-mail email@example.com ; visit www.eiglconsulting.com .