One thing that’s been in my mind recently is how businesses will survive the downturn.
The way I see it is there are three broad segments we can put business and products into; essential, deferrable and discretionary. These are going to need different strategies to survive.
Discretionary
Stuff we don’t really need.
Examples: Expensive travel, cafes, TV’s, spa baths, gourmet food, farmer’s markets, designer shoes, branded bottled water, 90% of what’s on sale at the typical suburban shopping mall.
If your business is in this category then you have a problem. You’re going to have to demonstrate some sort of need or value to the customer.
To survive in this category it’s going to take innovative thinking in marketing and production along with some radical revisions of pricing and cost structures.
We see some of this with fast food chains offering things like 99c and $1.99 meals. I expect we’ll see many cafes offering 99c coffees and restaurants offering $19.99 “recession buster” meals.
To make money on these deals business owners are going to have to keep a canny eye on their costs, the prices customers want to pay and be very innovative in their marketing.
Deferrable
Things that can be put off for the moment
Examples: Computer repairs, mechanics, homewares, mobile phones, motor vehicles
As a former computer tech, this one’s close to my heart and there’s no doubt the tech sector’s already being crunched by this as people put off purchases and maintenance.
The key to surviving here is in motivating customers not to defer purchases. It’s going to be a matter of cutting costs and reviewing product range and price points.
This means more marketing that emphases the benefits of your product (eg cleaning up your computer extends its life and saves you money) or making the service more affordable (eg 30 point inspection service for $29.95).
Essentials
Stuff we can’t do without.
Examples: Basic groceries, energy, telecoms, shelter
Strangely I think this sector will see the most blood on the floor. For the simple reason too many business owners believe their products are essentials.
A good example is the belief if you are in food and groceries you should be fine. That’s only true if you sell food and groceries people need and can afford.
For instance many of those stall holders at your local farmer’s market might sell food, but people don’t need cold pressed, extra virgin olive oil at $20 a litre or ash rolled goat’s cheese at $40 a kilo.
Even if you are selling basics, you’re going to have to watch your costs and your competitors. You need to be able to meet the price point savvy consumers will demand in the next few years.
If you’re selling tomatoes a $7.99 a kilo when the guy around the corner is getting them out the door for $4.99 then you need to look at your suppliers and your costs.
The overriding themes through this post are “price points” and “marketing”.
We are going to have to let them know we can deliver what they want at the price they want.