The current trading climate is often viewed with pessimism and doom, however, managed the right way, there are huge opportunities to build market share and benefit of the economic downturn.
To prosper in uncertain times, it is crucial not to take unnecessary risks, but to focus on your current customers. The most obvious recipe to survive and benefit from the volatile market is to deliver the solutions and experiences your current customers want – today.
Over the past months I have met several retailers who relate the most critical consequence of the economic climate to financing and capital management. The majority of them have failed to analyse and realize the impact to their customer base. The changing economic environment may have made old customer knowledge irrelevant as segments of the market have turned more conservative, whilst other segments have remained unchanged. The process of making a buying decision may have changed and there may have developed new target markets for existing products.
It is imperative to understand your customers, what they need and how they want it and serve it to them today.
Delivering a differentiated and customer relevant offer is a common element of high performing businesses, it is not a matter of squeezing costs nor lowering prices. Past recessions have shown that cutting costs and prices indiscriminately have been bad and fatal for businesses. These steps have generally gone hand in hand with reduced service which in turn have lead to diminished brand value, making customers inclined to defect and harder to win back.
This is the right time to be customer focused
A time for opportunity as well as risk.
Tactical issues to address
1. Strategic Cost Management, eliminate non-customer beneficial costs and cost optimasation.
All costs balanced against customer impact
Don’t cut costs at the detriment for the customers
All cost reduction programs should start by segmenting and analyzing your customer base.
Profitability, Loyalty and acceptance of self service.
It is generally a better formula to allow customers to service themselves than to simply cut staff on the front line or replace qualified staff with cheaper unqualified staff.
It is possible to reduce costs whilst improving the customer experience
You need to understand why and when customers need service in the first place, then eliminating these reasons by addressing product design, communication, store signage, planograms, packaging etc
2. Customer retention, secure your customer by understanding the change they are going through and offer updated and tailored products and services
Customers are changing buying behaviour
For instance customers may be more inclined to ask for layby, retailers need to prepare for this change and increase the capacity for layby and implement tools and systems for customers to maintain their layby with minimal cost per interaction for the retailer. Maybe a self service kiosk can be installed where customers can deposit payments towards a product. At the same time the cost saving can be re-invested into marketing the easy layby service for new target customers.
At times when the customers are more likely to defect it is more important than ever to deliver a flawless customer service.
3. Growth through customer acquisition, win customers from competitors slow and unwilling to adapt, and tailored products and services for new and emerging target groups in the market place.
Whilst household expenditure tend to be negatively impacted during recessions, it is important for retailers to compensate the downfall with new customer acquisitions.
All too often marketers are too focused on quantity of new customers rather than quality. It is important to be strategic in customer acquisition to avoid churn. Attracting the wrong customers may lead to a higher cost in attracting than they will deliver in profit before they defect. Retailers must look at the dual goals of attraction and retention hand in hand. Ensure the cost of serving new customers are in-line with your current and future business operations.
4. As credit begins to flow again, there will be increased activity in mergers and acquisitions. Be prepared and make a stand, be open for opportunities.
Industry consolidation can be of benefit for companies as long as there is a meaningful relationship between two companies and not merely a re-branding exercise. Customer base, brand values and operational structure needs to have a clear opportunity for optimization to be a merger of value.
Consider the customer through out all phases from planning to post merger integration.
Speed and integration is critical to success but companies must balance speed with planning and assessment of customer impact. Consider appointing a cross functional team from both parties to assess and ensure the customer relevancy in the integration process. This will both aid successful planning and communication. Having the ability to foresee customer issues will support the acquirer to retain customers
5. Expand the operating model to new markets with minimized additional overheads.
Irregardless of the global economy, globalization will continue and you need to consider its impact wether you are a multinational or national retailer.
This is a good time to re-evaluate the geographic relevancy behind servicing your customers. Multinational retailers may have to opportunity to merge service functions across several geographical markets to cease cost efficiencies.
Local retailers may have an opportunity to expand to other geographic markets with a small increase in overheads.
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