Some business owners will implement cost cutting initiatives in uncertain times, hunkering down to weather the storm.
Some leaders carefully select their growth opportunities and position themselves to capture market share. Others review their sales force performance to improve competitiveness.
Many companies batten down the hatches by implementing across the board cost reductions. But is this always the right thing to do? By focusing on 3 key areas that can maximise the effect on your business, I hope to give you some food for thought.
Review your product offering
The priorities of your top customers may be different in a tough economy. Customers that previously prioritised new growth opportunities may now start to focus on looking after and retaining existing clients. By finding out what matters to your top customers you will be able to focus your sales and marketing efforts to their needs. You might need to update your collateral and the way your sales teams work the marketplace based on these new customer needs.
Focus cost reduction and productivity improvements on the activities that drive the biggest improvements in profit
Basing your cost analysis on trying to identify your most expensive activities and then focusing on those to reduce costs is much more effective than just applying cost-cutting across the board.
Initiatives that are undertaken to reduce costs should include standardising your product offering (fewer ‘one offs’ or bespoke products), eliminating unprofitable customers, introducing standard quoting and pricing methods and amalgamating some sales back office roles.
Be cautious with your pricing
Pricing has a larger impact on profitability than almost all other levers available to Business owners. You should always be very careful with discounts, especially during uncertain times. Every pound you cut directly hits the bottom line by the same amount.
Stricter pricing policies will be needed to avoid price wars and price slippage – it is especially important to define what those are. Differentiation becomes increasingly important; are you providing a different value proposition to your competitors? If so, is it possible to raise your price in a downturn?
Some key strategies you should consider:
- Stricter performance management – are you getting the most out of your sales teams?
- Improving the quality of your customer prospects – less time wasted with timewasters!
- Reviewing the deployment of both frontline and back office personnel (territory coverage, roles, activities, number of people, etc.) – are your people in the right places at the right times?
- Finding new ways of financing sales – why should you be your customers’ bank?
- Reduce, eliminate, consolidate or outsource non-critical activities – both to save cost and improve focus
- Take the opportunity to improve the productivity of frontline sales by implementing a value based selling approach
The clever business owners will use several of these approaches to improve their competitive position by working effectively with sales management in a slow-growing economy.