1. Focus on your core customer
During a recession, leaders may be prone to panicking and stretching their business in an attempt to acquire new customers. Alternatively, your best strategy is to strengthen relationships with existing customers. Consider the cost-to-benefit ratio of acquiring new customers compared to retaining existing ones.
According to insights generated by Bain & Company, a 5% increase in customer retention produces over 25% profit increase. This comes as a result of focusing on return customers which are loyal purchasers over time and consequently lower a company’s operating costs of servicing them. Additionally, these same return customers will be more likely to refer other customers, are often more willing to pay a premium and are more inclined to stick with you rather than switching to another unfamiliar competitor.
Thus, contacting your most valuable customers to offer them reassurance and loyalty benefits if possible, will go a long way towards consolidating brand loyalty and in turn, growth in revenue and profitability. Automation has made it easier than ever to keep your existing clients happy, and this is something that can be focused on now and be carried through the long-term to build business resilience.
2. Focus on your core competencies
Bain & Company undertook an in-depth study of what differentiated winners from losers over the past four recessions, and found that poor performance could often be attributed to following ‘dead ends’. During the last downturn, lagging companies had a tendency to panic and venture outside of their core business, chasing investments in the hottest trends and services before they burnt out altogether.
There is a time and place for diversification – but in a time where efficiency and ‘fat-trimming’ is key, focusing on perfecting your core product and on honing what you know and do best, is the most efficient, effective and profitable move towards recession-proofing your business. Incorporating new products and services is not effective diversification. It will burn time and money in an era where both are scarce, and potentially compromise your core business, hence damaging your customer relationships and reputation.
Narrow your focus and double-down on core competencies.
3. Focus your products, services and processes
Smart streamlining will help position your business to achieve growth in revenues and earnings through and beyond the recession – this is precisely the strategic approach taken by Costco in the last economic downturn. Bain & Company studied the discount retailer’s approach to simplifying processes and saving money and reported;
“Early in the financial crisis, Costco streamlined stores, limiting the number of product variations in each category, especially branded products, in order to get bigger wholesale purchase discounts. It now sells about 3,700 stock-keeping units (SKUs), compared with 60,000 SKUs for competitors on average. Along with reducing SKUs, Costco revised its category mix, shifting from hard goods to more consumer staples.
The discounter also set about fine-tuning its supply chain to reduce storage costs. It centralised prescription fill centres, cutting those costs by half. And it relied more on cross-docking centres, to reduce shipping time to under 24 hours, which in turn cut inventory costs.”
12 Strategies to Survive and Thrive Through a Recession
In an attempt to further help you navigate these uncertain times, we have compiled a report containing 12 proven resilience strategies by drawing from a collection of case studies, research papers and insights from experts including Harvard, Bain & Company, Deloitte, and McKinsey & Company.
Need a little help?
We would love to help you weather the storm by offering a complimentary strategy call with our Strategy Director, Grant Davidson. Grant has led our company and many others through three prior recessions over nearly three decades, thus has the experience and knowledge needed to help you assess the current standing of your business and identify growth opportunities.