October 23, 2013 | Valerie Wong
Any entrepreneur will know that running a business can be a challenge even at the best of times. However, once a recession hits, things get even harder for most business owner. Is it possible for a company to stay afloat and even prosper during tough economic times? The answer is an obvious yes. To accomplish this, there are a couple of things that you will need to keep in mind and most importantly, apply in your daily operations.
Lowering Prices Isn't Always the Best Solution
In a recession, demand will go down. This has been observed in the most recent economic downturn that hit the United States, where retail demand dropped by close to 10 percent, while the auto industry suffered even more, seeing demand plunge by over 50 percent. The business to business market wasn't spared either, seeing a 28 percent drop during the same period of time.
Many companies have responded by slashing prices, but this hasn't worked. Demand stayed low and got even lower for a few months during the 2008 recession. Consumers simply weren't responding to the falling prices. Offering deep discounts during a period of recession can have many long-term consequences for your business. It can destroy brand loyalty as competitors try to match each others offers. Also, it can tarnish your brand's image by making it seem “cheap.”
Offering Your Customers More Options
Cutting down on prices may not be the solution, but there is another option available to you. During a recession, consumers will be more likely to watch their spending a lot more carefully, but there will still be a reasonable amount of demand for many products.
Take electronics, for example. Consumers would still be in the market for media players, but they would be looking for something more affordable and would be willing to settle for a product that has less “bells and whistles.” As such, a company can offer both high end and low end products. Apple has been doing this for quite some time now. They offer some “premium” products, such as the iPhone and iPod Touch, but they also have less expensive products such as the iPod Shuffle.
Cut Down on Expenses
Certain expenses will be crucial for your business to survive and remain competitive, such as money that you spend on marketing. But there are some others which can be scaled back on. A recession is the perfect time to take a much closer look at your company's expenses and see which ones could be reduced without having a negative impact on the company's survival and growth.
This can include unnecessary business trips, office parties, or the purchase of new office furniture that could easily be pushed back by a year or more. Sometimes, you may even need to cut down on certain incentives given to employees, such as bonuses that you give to your sales staff.
Work at Keeping Your Customers
Remember, they are your best asset. Retaining an existing customer will be a lot easier and less expensive than acquiring a new one. Do everything that you can to maintain a positive relationship with your customers, in order to keep them both loyal and happy. This would be very important at any time, but during a recession, you will want to deploy additional efforts to keep you from losing customers.
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