Beware, customers mean business

As trading continues to retrench, firms are furiously cutting costs in an attempt to maintain solvent competitiveness. All the while it acknowledges that it needs to reassess how to maintain stickiness with its reducing customer base that has either disappeared or reduced their level of spending.

At the forefront of these deep gashes are the very people whose job it is to maintain relationships with customers. While the marketing function picks up from the debris it must demonstrate its understanding of the organisation's offerings and how they will aid in improving trading.

GCC retail sales crossed into negative territory in September 2008 collapsing to a trending monthly low of 11 per cent by the end-2008. Locally this is backed up by the collapse in the UAE inflation that peaked at 12.3 per cent in 2008 and is now forecasted at 1.9 per cent and 3.4 per cent in 2009 and 2010 respectively. A little inflation is economically useful and the marginal expected increase in 2010 bodes well for some green shoots of recovery.

To be in a position to take advantage of the recovery, marketers can take some of the following steps to improve trading performance, the results of which being measurable gain itself support within the business.

Ways must be found to invisibly remove costs while maintaining customer engagement. American Airlines removed one olive from their salad for first class passengers saving the business $40k. Customers are intelligent, sensitive and often a thankless lot. A retailer I know once moaned that giving away its product for free would have a negligible impact on complaints. This is more often than not professional sleight of hand. Here are a few magic circle secrets.

Review and right size your portfolio

In good times to maintain growth organisations launch or buy new product lines. The consolidation of the car industry in recent years is a prime example. While gaining cost synergies through shared production platforms, it launched a dizzying array of choices onto consumers, all of which required sales and post sales support. When recession began, the US car industry all but collapsed under its own weight. Today the industry is either divesting brands via trade sales or closing them down.

Firms need to critically assess their product range to gauge which of them offer a competitive strategic advantage. This means selecting products that have a market today and that could grow through investment in branding and product innovation. Next, the businesses need to organise around supporting their offerings. Anything that distracts from that task is best outsourced so ensuring management focus. Mostly back office functions would fall into this category, although tie-ups with firms offering superior post-sales support must be considered.

Get bang for your buck

Every time costs are cut, some element of the business operation suffers and can lead to a disproportionate impact on a company's profits. All cost cuts need to be measured with a view to their impact on key products, be it their production, sale or core clientele. Loyalty cards have been used to great effect by supermarket giants in measuring and growing the profitability of each customer. As this information already exists the marginal incremental cost of carefully mining historical data and selectively sweating that asset is invaluable. It's prescient that in this painful recession it is these behemoths that are increasing sales. Tesco's sales progressed from £51.8bn to £59.4bn in 2009 and at the luxury end, Waitrose rose from £4.0bn to £4.2bn.

Retain and attract key personnel

If a business's most important asset is its people, then they too should shoulder the organisational programme for return to business fitness. Not necessarily through redundancies, instead flexible or short-time working, unpaid time off, forgoing of pay increases or temporary pay decreases. Shared equally across an organisation, it can be a positive motivator. Where deeper pockets exist, downtime can be used to upskill employees with either new skills.

Business leaders recognise the gleam in their IT director's eyes during budget formulation as requests for new technology are lodged. Lean times turn the most necessary of projects into something that can be forgone. Investment should continue, but by focusing on lower cost and quick return projects, IT can be harnessed to support the business.

Great strides in technological innovation have brought cost-effective video to voice calling. Where I have used video conferencing, the additional interaction has led to tangible benefits for business results. Applying this readily available technology to customer interaction improves response times and builds lasting relationships. It also reduces travel related costs including the productivity lost while travelling.

These steps are part of the process that can see your business move from threading water to speedily moving ahead of a distressed market and there is no reason why the function closest to your customers' desires shouldn't be taking a lead role. Your clients are spending, albeit cautiously. Understanding their needs and their fears will engender loyalty. Fears might be dealt with by extended warranties, changes in product make-up, etc. Association can be made by supporting causes close to your customers' concerns eg attaining green certification programmes. The building of strong and effective relations with your customer base in difficult times will lead to exceptional returns once the marketplace comes out of its stupor. This reawakening will be gradual and the business model will need to be reassessed through the turnaround, but all eyes should remain firmly focused on your customer.

- The author is a senior financial consultant based in Dubai

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