Things seem to be settling into place.
The subprime mortgage crisis and subsequent recession of 2008 wreaked havoc on businesses large and small. Few were spared from the devastating effects of the lending crunch, the drop in consumer confidence and spending, the freeze on investments and the general sense of cynicism which seemed to hover over Corporate America as the bubble burst from excess fueled, not by value generation, but by exaggeration . . . to put it mildly.
For most of us in Small Business, the last several years have tested our limits and brought about more change than we ever expected or even wanted. But change is good if you can use it to your advantage, and today, as a result, those small businesses that learned to adapt and evolve with the changing economy have started to move beyond mere survival to new levels of success.
Yes, we’ve all learned from the past, but now it’s time to look forward. It’s time to focus on profitability and sustainability which stems from the generation of real value for our customers. It’s time to build a high-demand business.
Even during the recession, there were plenty of businesses doing extremely well. It’s all about demand. Companies having to do with the green movement such as renewable energy and clean technology, and those that cater to the aging Baby Boomer generation actually grew despite the recession, while companies specializing in credit counseling, debt and budget management, consolidation and debt settlement grew precisely because of the recession. In the end, it doesn’t matter what industry we may be in; there are certain qualities that we can develop for our businesses that will always be in demand — regardless of the economy.
Price to Value:
Debates over pricing strategies are as old as currency itself. Setting the right price to value is critical because it affects every aspect of a business. Price points are prices at which demand for a given product stays relatively high. During the recession, when survival was the name of the game, many companies lowered prices just to cover costs and give themselves a chance to remain in the market. As a result, the majority of the companies in a given industry were forced to reevaluate pricing strategies to maintain product position. In these situations, while it is imperative for a company to reduce overhead and lower costs to account for price adjustments, it must never lower its standards or the value it creates for its customers. We should always seek to provide more value than what our clients pay us for. Please don’t misunderstand, I’m not proposing that you undervalue yourself or your business, but your clients should always feel that they received more value for their money when doing business with you as opposed to your competitor. Value will always be in demand — no matter how bad or how good the economy might be.
How much is good service worth? That was the subject of a study in England by the Chartered Insurance Institute (CII) and Ernst & Young, who found strong consensus that the insurance industry is not providing good enough customer service to its mid-corporate customers according to 69 percent of brokers and 87 percent of insurers who were interviewed. The study concluded that the insurance industry could save £80 million per year, or $121 million, by reducing duplication and improving customer service. Mark Radburn, chair of the CII’s Broking Faculty, says: “One of the key elements of the report is the requirement to improve our understanding of the customer’s needs. To make this achievable, we would need adequately trained staff and a more professional approach towards customer service.” The market needs to work together to improve professionalism and challenge ourselves to deliver ‘world class’ customer service. Service quality will always be in demand — especially in a difficult economy.
At the end of the day, business is all about the relationships we form through the exchange of value. People prefer to do business with people they know which is why repeat and referred business is so effective and yields a higher rate of return over time. In our current cutthroat economic environment, relationship-based businesses tend to fare better than industry averages due to increased customer loyalty. Additionally, research shows that a relationship-based approach to sales boosts performance and increases the likelihood of residual sales. Relationships will always be in demand — regardless of the economy.
The pendulum of public perception toward business has swung away from the decades-long greed that culminated in the recent sub-prime mortgage debacle I opened up this column with, and toward a more socially responsible view of business. Now more than ever customers are attributing a higher value to socially conscious organizations and many businesses are finding that in addition to all the right reasons, social responsibility is good business. As the great Sir John Marks Templeton once said, “Those who do good do well — in any economy.”
Manny García-Tuñón is a columnist for EL Nuevo Herald and President of Lemartec, an international design-build firm headquartered in Miami, Florida. He can be reached at firstname.lastname@example.org and www.mgtunon.com