Two recession beating tactics
I have done a lot of trade fairs and spoken to a lot of business people over the last three months. There is the obvious theme of the economic slowdown or credit crunch or if your prefer the technical term – recession. Everyone is cautious and the focus seems to be on cutting overhead. From talking to all these people I have noticed two main trends – firstly, dropping less successful lines of business and focusing on the main money makers, secondly taking on new products in order to build more revenue and split the risk.
Focusing on the most successful parts of the business is a solid approach. Drop anything which is not performing so well and put your man power where it is most productive and generating the most return. The obvious problem here is that eggs in basket situation. You have increased exposure to reduced demand on one product line.
Taking on more products is a more pro active and adventurous approach. If the new products complement your existing business then you are leveraging your existing customer base and generating more revenue from the same number of customers. There is amazing potential to have a great return on investment if you do not have to do the initial legwork finding customers. If your new product is in a totally new industry you run the risk of having to do all the hard work and investing now with no reward for the first few months. This is dangerous territory in hard times when cash flow is tight. We all know though – fortunes are made during recessions, and it is a great time to boost your market share whilst your competitors are too scared to act. Be too bold however and you wont last.
Preparation, testing and contingency planning
After following the massive screw up that has been the opening of the new Terminal 5 at Heathrow, I asked myself a few questions. For those who do not know about the Terminal 5 debacle, all you really need to know is that this new terminal received a lot of hype, media attention, cost a bomb and caused a lot of controversy. This is all before even being opened. Once it did open, the baggage sorting software failed and nine days of chaos ensued. It is estimated this failure will cost £16m in lost revenue and caused thousands of disgruntled customers. Lets just say it is bad PR.
In my eyes it is a wasted opportunity. A new launch should be a big deal. It should be exciting and very positive. In this case, the opportunity for a lot of great brand building has been wasted. The damage done will take years to repair. The sheer amount of media attention revolving around this launch makes it hard to go unnoticed when a problem arises. This begs the question, how can something so central to the operation of one of the world’s largest airports go so wrong?
Software failures happen. Technical difficulties hit at the least convenient time, every time. The reality is that things are always going to go wrong that is why we prepare for events, we test our software or equipment and we create contingency plans for when things go wrong. Let me explain these parts.
Preparation
We have all heard phrases such as “prior preparation prevents poor performance” aka “the 5 P’s” or “failing to plan is planning to fail”. Planning and preparation come hand in hand. For the sake of the argument lets say they are they same thing. This involves deciding exactly what you want to happen, what you will do to make it happen, how you will do it, and doing anything that needs doing beforehand. We all know about this stuff. The problems arise when planning is insufficient and lacking in detail. Lack of information, lack of experience, and poor timing often get in the way of preparation. For these very reasons it is advisable to do this long in advance.
Testing
In a world dominated by IT and dependent on so many variables, testing is ever so important. Make sure everything is not only in place, but that is is also working perfectly. If you are launching new software, test is thoroughly. If you are using a new machine of some sort, test it. New product/website/whatever, test it!
I had a nightmare situation once whereby I had produced some T shirts, and I put them on sale immediately wanting to get stuff out of the door and everything going forward. I sold a few the first day and posted them off. Two days later I washed my own and the print ran. I phoned the printer and they realised they hadforgotten to run them through the dryer hot enough to fix the prints. No surprise I started getting emails regarding prints running. I had to recall everything and deal with customers. Luckily the printer accepted the mistake and resolved it in a matter of days. No big problem except I was wasting money paying for postage twice and refunding people for the charge of returning their garments. A simple test delaying the launch 24 hours would have prevented the whole situation. Lesson learnt!
Contingency Planning
No matter how much we plan, prepare, test etc, things will go wrong. It is a part of life. Contingency planning is a true sign of being serious about your business. A contingency plan covers what you will do and how you will do it should the worst happen. It is where you detail how you will troubleshoot. This prior preparation can seriously minimise your losses when something happens. All major businesses have contingency plans, but very few small and medium sizes businesses do, and it is the smaller businesses who suffer the most!
As we work online, we are more used to preparation and testing. Do you test everything thoroughly? Any lessons learnt? Have you planned for the worst? Do you have a contingency plan?
Why do so many people not take online business seriously?
If you ask the majority of the population here in the UK, and probably in most countries, they do not consider those who make money online to be running a business. It is seen as shady and not proper. What is it that gives this impression? Does online business need to tidy up its act and become more transparent? Those of us who work online know that a business in the virtual world is not virtual at all. It is as real as any other business.
One example that could be contributing to public lack of belief in online business is identity theft. Identity theft has had a lot of press recently and is commonly associated with electronic use/storage of personal data and is at an all time high. It doesn’t help that the Government are constantly losing our personal data, but even without that so many people are still getting caught out by phishing attempts. We all get emails from a random bank we have never dealt with requesting we change or confirm our details – luckily most of us know better. The same goes for opening strange attachments which appear to do nothing but actually leak our keystrokes to unsavoury characters.
I think the biggest problem people have online is the low barriers to entry. Anyone can make a basic website and put the Paypal shopping cart onto it and sell something. Anyone can make a website and slap Adsense on it. This is true. A very basic website is something that you should be skeptical about, but no more so than a particularly flashy website. In these days scammers are capable of all sorts of things, and building a decent website is definitely not out of their reach. We as consumers need to be smart about these things.
How can we make our online business more transparent therefore putting our potential customers at ease? The best way is to provide adequate contact details and welcome questions. If someone has a query, and it is answered promptly and suitable information is provided it will go a long way towards giving the potential customer peace of mind.
Use a well known and reputable payment gateway. Companies like Paypal make big profits but that is fine because we prefer to pay via a system we know and trust. These payment gateways take your customers details and process the payments. The benefit for the customer is that they have the peace of mind that their card details are safe (hopefully) with a big company as opposed to being held by a smaller business, that might not have the same levels of protection in place.
Prompt delivery of orders is something customers remember and is one of the major points they will make when referring you. A good customer experience is remembered. On the flip side, a bad customer experience is remembered for a lot longer! Make sure the correct order is delivered on time and make sure you have suitable systems in place to achieve this and to deal with any other issues that might arise.
What does your business do to give customers peace of mind? Do you believe online business needs to become more transparent? Please share your opinions.