Recession. Consumers cut back on spending. Businesses cut costs and lay off employees. In response, consumers cut back even more.
Our economy is officially in a recession when the GDP growth rate is negative for two quarters or more. However, any slowdown in economic growth can have a negative impact on your business.
Your first response may to focus all your attention on bringing in more new customers as quickly as possible. After all, your current advertising methods have gotten your business where it is today, right?
If consumers are cutting back, your advertising may be less effective. You may find that you are throwing more and more advertising dollars out there, with less and less response. A recessionary economy can stifle new business. As consumers tighten their belts and reduce discretionary spending, you may find yourself fighting your business competition for a smaller pie.
Economic ups and downs are part of life. It would be unrealistic to expect constant growth. The big question is whether or not your business is prepared. Could your business survive losing 30% of your customers? What's your marketing plan for this scenario? Do you have one?
Fortunately, you have options. While new business acquisition is important, it is just one way to grow your business. You should always continue efforts to bring in new customers, but focusing on your current business can help prevent lost profits and even allow your business to grow while others around you are stagnating.
One of our existing clients was concerned about a downturn in his industry and asked us how he could handle a potential loss of 30% of his customers. He was not sure he would be able to bring in 30% new customers to replace them. We showed him how he could lose 30% of his customers and do the following:
- Increase his average sale by 2%...
- Reduce his direct costs by 2%...
- Get his existing customers to come back 2% more often...
- Increase his productivity by 1%...
- And bring in just 2% more new customers...
And the best part is that even if he lost 30% of his original customers his net profit would actually increase by 15% using this plan.
How quickly could you get your business back on track with a similar plan? And, what if you were able to boost a few of these percentages a little more? How would you like to be increasing your bottom line while your competitors struggle to keep their doors open? Even better, what would following a similar plan do for your business if your industry is not currently slowing down? Periods of slow growth can be a good turning point for your business. It can give you time to fine-tune your operations, increase customer service, and streamline procedures. Rather than spending all of your energy focused on how to bring in your next customer, you can take the time to build up back end sales to your existing customer base. Your greatest asset is your customers-are you doing what it takes to bring in the right ones and keep them coming back for more?
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