Guess what Amazon, Hershey’s, Wal-Mart, Ryanair, and MacDonald’s have in common? Sales are growing, and they are making money—in the midst of a worldwide recession! How can this be? The answer is simple: they offer good value, high quality customer service, at moderate and reasonable prices.
Amazon’s website is practically flawless and a pleasure to use. Books arrive in a few days. Order the same book at your local Barnes & Nobles, and you can expect to wait six weeks, and you will have to drive to their store to get it. No wonder Amazon’s sales went up 17% during the last holiday season that left most retailers with sizeable declines. They are having a difficult time keeping up with orders for the new Kindle electronic book reader.
Many of us love chocolate but had lately succumbed to chocolate snobbery, paying premium prices for “gourmet” candy bars made of cocoa grown who knows where but not nearby. Hershey’s makes good mainstream American chocolate bars, and their dark, semi-sweet chocolate would probably pass blind-fold taste tests with most of us. Consumers have come to their senses and back to Hershey’s, which is available pretty much wherever regular food is sold.
Ryanair is an international budget airline, based in Dublin, Ireland that experienced losses in the last quarter. It recently raised its profit forecast for 2009, however, as travelers in a weaker economy seek bargains. It also plans to order more planes in the next couple of years.
Wal-Mart needs no explanation—everyday low prices and chirpy service, that more and more people are using for basic necessities. Who needs to buy ordinary underwear at Nordstrom’s? Why do they even sell it?
McDonald’s prides itself on consistency of food quality and customer service wherever you go, allowing for regional preferences and customs, such as India where eating beef violates religious principles. They provide all this at prices that allow even the most frugal families to eat out. They also plan to open 650 new stores worldwide.
Enterprise survival today calls for CEOs and entrepreneurs who can skillfully navigate in our current economic turbulence. As a licensed pilot, I learned that of all the possible things that could go wrong in the cockpit, from an instrument fire to an engine failure, the one most likely to lead to disaster was panic. This means ignoring the shrieks of terror of those who all too readily see themselves as helpless victims.
Clearly, the companies mentioned above have prepared to continue despite tough conditions. What can you do to come out of this storm in one piece?
Find out what your customers’ priorities are. Many customers are rapidly changing their buying habits, from willingness to pay a premium for status labels to seeking maximum value, regardless of label.
How can you increase the value of what you sell? Reducing prices is one way, but not the only way. Offering new products or services is another. Starbucks is responding to competitive threats by offering instant coffee for $1.00 a cup. Not only do you save money, you waste less time in line.
To reduce household expenses, many pet owners are cutting back on visits to the veterinarian. So why not offer discounts at the vet for customers whose purchases reach a certain level at your business? Perhaps you can negotiate this offer with vets who are willing to shave a little off the price. If homeowners are cutting back on trips to the car wash, this may be an opportunity for a not-for-profit to hold a fundraiser through volunteers. Now is the time to be creative and seek out all those opportunities you never bothered to pursue in boom times.
Discover how can you exploit your competitors’ weaknesses. Acquistions can be a bargain today, and sometimes businesses can be bought just for assuming the seller’s debt. Oracle is on a virtual buying spree of small software firms. In a different competitive tactic, McDonald’s and Dunkin’ Donuts are cutting into the premium coffee market of Starbucks, which still charges as much as the cost of a McDonald’s meal–or more–for a cup of coffee with a French or Italian name, while Starbucks is closing hundreds of stores and laying off thousands.
Continue to let people know you exist, even if you must cut your advertising and marketing budget. Staying power and longevity count for a lot in generating respect for your brand. Instead of buying expensive advertising that is seen once and discarded, consider offering your employees a monthly dollar amount for allowing their cars to be “wrapped” with a graphic display of the firm’s ad. You save, they get extra money, and the ad is seen wherever they go for months.
Did you know that low interest rate FHA mortgages are currently available for first-time buyers with only 3% down? I was shocked when told this by a mortgage broker client recently, when the news is full of how banks do not want to lend. Why is this mortgage product not widely advertised?
Watch out for creeping deterioration in customer service. Shortly after a holiday season that was very disappointing to retailers, I visited an upscale department store in search of bargains. I know it was a rough Christmas for retailers, but the funereal tone set by employees’ behavior and attitutude made me want to exit as quickly as possible, and I observed other customers simply tiring of waiting in line to check out and leaving without making a purchase. This means you must…
Maintain employee morale, in spite of the possibility of layoffs and reduced benefits or hours. As difficult as this is, it requires nothing really new, just much more of it. Miss no opportunities to thank employees for their efforts, point out the danger of getting into the cycle of fear and depression that drives customers away, keep them informed of the company’s plans, and solicit their ideas for efficiencies, increased productivity, and better service. Let them know that you and the company are in this for the long haul and that you are committed to preserving the company and as many jobs as possible. This also means…
Keep employees informed. Bad news is not necessarily demoralizing to employees, but being denied the truth usually is. That creates the environment for dire rumors, fear, panic, time wasted guessing with co-workers what is really going on, not to mention time spent on the internet looking for other jobs. Periodic company updates from management are a good idea in any economic conditions, but especially now. Employees can generally handle the truth and may surprise you with their good ideas or at least their willingness to help in whatever way they can.
Look for alternative sources of capital. If you need financing for new equipment or materials to meet customer demands and the banks are uncooperative, look elsewhere. Credit unions, for example, have been untouched by the sub-prime crisis and are anxious to lend to those with solid credit. Entrepreneurs are no strangers to borrowing from friends and family. If you decide to follow this path, make sure you present your credit history and carefully prepared business plan just as if you were going to Bank of America or Citibank.
There is a great deal of capital on the sidelines, owned by people who would like to find a good investment. Many Japanese-Americans of considerable wealth became that way through the Japanese tradition of lending among members of close-knit, immigrant communities who wished to build businesses. The use of informal or alternatives routes to capital may be just what it will take to get our traditional credit systems to finally call off their strike.
Do not overlook the power of symbolism. Could there ever be a better example of this mistake than American Insurance Group? Days after receiving an $85 billion taxpayer funded loan from the Federal Reserve, AIG spent $440,000 on a week-long luxury resort retreat for executives and agents. After another $38 billion in Federal Reserve loans were granted, AIG spent $86,000 on a hunting trip to England for favored customers. However, we are all prone to such gaffs on a much smaller scale.
Sometimes it is not what is done but what is not done. After a layoff, acknowledge the pain and difficulty this decision involved. Cutting out luxuries makes sense when every dollar counts, but do not nickel and dime employees while executives are still clearly well paid. If employees are used to free coffee in the break room, their need for the caffeine is likely greater when they have to do more with less, and taking it away will breed despondency and resentment.
Conclusion. Hemingway once said that people are like tea bags; you never know what they are made of until they are in hot water. We are now in hot water. This is the time to hone your vision of what you business stands for, decide who will be on your team, create the elements that will distinguish you from the competition, and focus diligently on your objectives. Not every competitor will survive. Those who do will be immeasurably stronger when the economy recovers.