Secrets to Small Business Success in a down economy

How can a Small Business succeed in today's challenging economy? How can we generate more revenue without adding heavy marketing costs?

Let's start with the basics. There are only two ways to improve profit: Lower costs or increase income.

Although it's a popular practice in an economic downswing to focus on "lower costs" (downsize, cut training, cut advertising, etc.), let's remember two facts. 

First: You can only cut costs so far — when you're down to zero, you can't go any lower! 

Second: Except for those operations who are bloated and wasteful (do you know any small businesses who fall into this category???), cutting key expenses is like killing the Goose that Lays the Golden Egg [see story on Wikipedia] — you could be cutting off tomorrow's source of revenue for today's short-term benefit.

So the effective and responsible long-term action is to concentrate on ways to increase revenue in the short run without adding costs to do so. Sounds great — but how do you do that?

The good news is that there are only a few ways to increase revenue: 

1. Increase prices
   
2. Sell more volume

> Sell more to existing Customers
> Sell to more (new) Customers

We'll have to discuss "Increase prices" later — it is actually a legitimate and viable option, but not as a 

first choice.

Let's turn our attention to how to sell more to existing Customers. We have to answer two basic questions:

1. Why do they buy?
2. Why do they buy from you?

At its most basic, Customers buy to satisfy a need or want. As I use the terms, "need" is a physical or mandated requirement (pay taxes, comply with regulations, etc.). "Want" is more emotional in nature, having to do with lifestyle, personal preferences and desires. In other words, I "need" transportation; I "want" a new Lexus... In this context, most consumer purchasing, as well as a great deal of business-to-business buying falls into the "want" category.

This is important because "wants" include a great deal of emotion in the purchase decision. It's this emotional component we want to consider.

We can view the emotional side of a purchase to include two core elements: Feelings about the product or service itself, and feelings about how the transaction is handled (in other words, feelings about how we are treated while we are in the purchase process). And that's our key to success!

Small businesses have three basic pieces to work with to establish a competitive advantage:

1. The product / service they offer
2. The delivery system by which the product / service is provided to the Customer
3. The Customer Experience in which the transaction occurs

Let's assume that, in today's competitive world, products alone rarely drive purchases, especially at the small business level. While it is absolutely critical that you offer superior / excellent products and services, as a small business, your competitors will also offer good (or even identical) products and services. And even a temporary advantage here is easy to duplicate by others. So a "product /service excellence" strategy cannot provide long-term advantage. (We'll save the "low-price leadership" discussion for another posting...)

The delivery system includes the process in which products and services are delivered to the Customer as well as the environment in which the transaction takes place. This can be another source of temporary advantage (i.e., Rainforest Cafe). Of course, you want to offer a distinctive business environment and fast, accurate order processing and delivery to your Customer. But your delivery system is also subject to copying or "fad" behavior, and is not a source of long-term advantage.

So what's left? The emotional dimension of Customer desires — the consistent Remarkable Customer Experience! This is where the Customer just feels good about doing business with you, and wants to do it over and over — and also wants to tell others about how good you are! They become your Advocate — in reality, an extension of your sales force.

Notice that delivering exceptional Customer Service is not an end in itself — it is, instead, a means to the end: a consistently Remarkable Customer Experience. It is one of the tools you use to produce a consistently happy (an emotional response!) Customer / Advocate.

So in today's challenging economy, how do we stimulate existing Customers to buy more? We help them feel good about their purchases and about doing business with us — and at a deeper level, we help them feel good about themselves because they do business with us.

Notice that this approach also drives our second objective: get more Customers to do business with us. Our Advocates and other positive word of mouth will drive new Customers to us in a positive upward spiral of success.

Also notice that it takes little to no expense to deliver consistent Remarkable Customer Service and a Remarkable Customer Experience. It does take (1) a decision on your part to do so, then (2) the hard work to study and communicate with your Customers in depth to discover their real wants and desires; what it is they're really looking for when they do business with you. (Remember that when people buy drills what they really want is "holes.")

//Richard Randolph

Florida Customer Service Institute

www.FloridaCSI.com