As the recession starts to bite, company executives are busy planning moves to boost profits and cashflow. These are likely to include cost reductions, delayed capital projects and revisions to invoice payment terms wherever possible.
But there is one priority for all companies over and above these activities: keeping your customers.
As writer Peter Drucker once wrote, the purpose of a business is not to deliver a profit, it is to create a customer. Any actions that limit your ability to attract and retain customers will hurt your short- and long-term prospects. If conditions are hurting your business, the chances are that they are also hurting your customers.
A key question in today's difficult conditions is therefore this: "What can we do to make the lives of our customers better?"
This doesn't mean giving away all your profits, but it may involve targeted actions that prioritise long-term loyalty over short-term margins.
Here are five ideas to help you maximise your chances of keeping your customers, maintaining your sales and driving short- and long-term profit growth:
- Create a 'value' range or proposition. Tesco has tried to stem defection of customers to discount names such as Aldi and Lidl by introducing its Discounter range across food and non-food categories. The products have been introduced with prices significantly lower than comparable brands and are drawing 300,000 more customers a week, according to Terry Leahy.
- Unbundle your products and services so that your customers have more choice as to how they buy from you. Ryanair is the master of unbundling. Passengers get cheap flights, but then must pay more for food, luggage and even checking in. What can you do to unbundle your customer offer?
- Focus where you have a clear advantage and reduce your participation in areas where you can't win. Unilever, for example, has driven profit growth by focusing investment on six core categories where it has the competitive advantaged and which deliver 80 per cent of its sales.
- Identify opportunities for customers to self-serve. Supermarkets positioned self-service as both lower cost and more convenient for customers. Ikea have created its business model around self-assembly. How could you lower prices and improve speed, ease and responsiveness by enabling your customers to do more of the heavy-lifting?
- Develop loyalty rewards. What rewards do you give your customers for staying with you? Banks are notorious for rewarding new customers at the expense of existing customers. How can you encourage repeat spending and greater emotional attachment to your business by offering better prices, special deals or other rewards to your best customers?What other ideas have you seen succeed in keeping customers in difficult times?