What Not To Do When Times Get Tough

When you look at businesses that are struggling, you generally see two reaction in attempt to get out of the slump.

The first reaction which generally is seen when a company declares bankruptcy or just before, is the add more fees without adding any value solution. Airlines are currently guilty of this, as most are adding fees everywhere without adding any additional value to their customers.

I recently took a trip and was charged for curbside check-in, for checking a single bag, and for a soda while on the flight. The flight attendants and check-in receptionists were rude, no doubt because they have to deal with a bunch of angry customers. Southwest Airlines’ marketing team was just handed the golden platter of advertising opportunity, because people are angry at airlines for all the fees, and Southwest doesn’t have all the extra fees.

The second reaction which is actually consumer focused, is to change your business so it is more appealing adding value, in an effort to drive more business. Quiznos is a perfect example of this with their new pricing. I’m not sure if the end-user gets anything more from Quiznos, but the price / value point is far easier to understand which makes their restaurant more appealing.

Times are tough for a lot of retail businesses, and I can guarantee that simply raising prices will not create a more profitable or stable business unless you know for certain that your customers will happily pay the extra price.

Do not simply do these when times get tough:

• Add fees without adding some value with those fees (The airline raise).
• Grossly increase prices to accommodate for lost revenue.
• Unilaterally change contract terms (Think AT&T and Verizon).

Be careful doing these:

• Placing customers in opt-out programs.
• Cutting the variety of the products you offer.
• Dramatically changing or adding confusing policies and / or pricing structures.

Unfortunately there’s no magic recipe to making it through tough financial times, but these are some good ideas to help keep customers coming back to your business.

Here’s my recommendations to do before you ever get into real trouble:

• Make your price / value point more appealing (like Quiznos above). Be extremely cautious with this one because it can easily backfire if your customers think your smoke and mirrors are just an effort to pad your revenue.
• Offer rewards or incentives for frequent customers.
• Retail & Restaurants. Offer incentives to customer who bring their own cups or shopping bags. Ideas like this can help reduce overhead costs, and produce less waste. It’s win-win for everyone.
• Offer incentives to customers that refer their associates and friends to your business. If you’re not doing this already you’re doing something wrong.
• Offer incentives to employees that refer their associates and friends to your business.
• Diversify your marketing efforts. Don’t just use the Yellow Pages or radio ads. Puts your eggs in more baskets as long as they all provide real business. You can try local PPC marketing, sponsoring events, newspaper ads, and more.
• Optimize your business. This is a great time to see if you can save money on the services that your business already uses. Internet, phone services, your merchant account, shipping costs and methods, are all great places to start. Find services that you don’t really need and cut those first.
• If you need to purchase new IT equipment look into low power consuming equipment. Low power servers, computers, and network hardware can save thousands per year in energy costs.
• Reduce staff. This is truly one of the hardest and most unpleasant aspects of owning a business, but realistically, if it’s going to potentially save your company then you should consider it. My personal opinion is that this is an absolute last resort, unless you have employees that you were planning on releasing anyway, but it is sometimes necessary.

Every dollar you can save will really help later when you’re completely cash strapped. Start doing these before you are looking an an insurmountable situation that will ultimately end with the end of your business.

Let me know if you have suggestions or experiences of your own.