Wherever you are in the world, the economic base is changing. The growth we have enjoyed over the last 10 years is ended – at least for the time being. Trade wars, the economic cycle, Brexit, and the demise of diesel are all taking their toll in different geographies.
Economic downturns make growth difficult for any company. However, growth is a drug and a dangerous one for business leaders. They need it because they have promised it. Organic growth cannot go on forever. Growth through acquisition is expensive and can result in serious indigestion.
When trading conditions become more difficult, customers spend their money more cautiously. They may spend less and they certainly will look around more. The natural reaction in these circumstances can be to maintain growth by cutting prices. This doesn't always work. Take for example the highly competitive sports clothing and footwear market where discounts were deep before Christmas. JD Sports did not discount its prices and in mid-January it revealed that it has outrun other retailers over the Christmas period. All this as well as keeping earnings in good shape. Driving down prices can be a zero-sum game where nobody wins. It is not one that we recommend.
If price discounting isn't the answer, what is? Research by the Georgia Institute of Technology has found that companies pursuing innovation as their main business strategy enjoy profit margins that are 50 to 100% higher than those that don't. Innovation isn't a nice option, it is essential in the new economy.
Another study, this one by the Institute of Customer Service in the UK, determined that over half the people sampled would be drawn to a new supplier by more friendly, helpful staff. What won't work is cutting costs by reducing the number of customer service representatives or getting rid of a real receptionist for a cheaper automated answering system.
If you want to grow and prosper in the new economic order you need a value proposition centred on innovation and a great customer experience.