Treading warily among the green shoots of economic recovery

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The recession is technically over, with much debate among economists about a U, V or W shaped return to good times. The phrase ‘green shoots of recovery’ became an accepted part of business conversation six months ago, but many still feel the pain of the effect of the recession.

Should the entrepreneur now assume that the bad times are now just a fading unpleasant memory and that it is good strategy to go back to business as usual? Or do those ‘green shoots’ disguise sharp spikes waiting for an unwary entrepreneur to tread on them?

Research by the UCT Unilever Institute of Strategic Marketing working with Bateleur Khanya Research Solutions (BKRS) shows that while the recession may be technically over, the majority of consumers surveyed are even more cautious in their spending patterns now than they were last year in the midst of the crisis. Consumers reported that access to credit is also worse in early 2010 than in mid 2009. Head of BKRS Gordon Hooper was quoted by BizCommunity.com as noting that consumers were spending less on themselves and are more likely to postpone the purchase of big ticket items. Prof. John Simpson, the Director of the Institute is quoted in the same article as saying “The reality is that buying behaviours formed during the ‘Big Squeeze’ are likely to continue long after the recession is technically over”. Interestingly, earlier research by the same team had shown that even consumers who had not been affected by the recession had changed their buying patterns to become more conservative.

What sort of buying behaviours does that mean? Overwhelmingly it means that buyers will look for value for money. Known brands, price and quality issues are all important. But consumers will not hesitate to drop brands they have been loyal to if they see them as being wasteful. They will buy down where they can, putting off major purchases, taking smaller pack sizes and favouring necessities over nice-to-haves and quality over frills. And although all the research mentioned was of consumers, entrepreneurs should not assume they will be insulated from this behaviour if they sell B2B. Attitudes of business owners are likely to be identical – they are after all consumers as well as owners.

The entrepreneur should realise that to apply ‘business as usual’ practices to the current situation may be to risk commercial suicide. Instead they could look at taking some steps like:

• Talking to their customers. Yes really talking, not just about transactions but about the business relationship, including asking tough questions like ‘what are we doing wrong’? ‘If you were running my business what would you change’? ‘What action from us would delight you most’? If the customers are businesses as opposed to individuals, the entrepreneur could engage them in discussing what they are doing to counter recession-linked problems, and then trying to figure out what he or she could do to help them.
• Looking at the value proposition they offer their customers, and their unique selling propositions. The entrepreneur should focus on how the company can deliver more value to its customers without adding significantly to cost to the customer. The company could increase product quality, cut out frills that add little and stop delivering faults within its products. If there is no real value to customers or uniqueness in a product range then the range should be revised or possibly even dropped. The entrepreneur should focus on aspects of value like durability and low maintenance – and ask ‘how can we improve here’?
• Retraining order takers to convert them to salespeople. Businesses need real salespeople who can look for buyer needs and then demonstrate the value of purchasing the company’s goods and services. Anyone in the organisation who works on the expectation that the buyer should buy from them because he always has, is a liability, and the business cannot afford liabilities in this climate.
• Communicating the value proposition in everything the business does. That includes the web site and sales brochures, which should be checked and updated. The company would benefit by training staff to understand what the customer regards as important. Communication being a two-way street means that it is important to check with customers to make sure they have absorbed the value messages.
• Increasing the accuracy of everything the organisation does – especially keeping promises. It must not make mistakes on invoices, or spell a customer’s name incorrectly. There should be an ironclad rule to return phone calls and answer e-mails. Responses to customer complaints should be prompt and there should never be an assumption that the customer is wrong or nitpicking. The creditors should be paid as promised.
• Bringing the staff into the plan. The business cannot afford to have a grand plan at management level and business as usual on the shop floor.

As the entrepreneur navigates the competitive seas of 2010 he or she should never forget that consumers are cautious, and even the unaffected consumers are being selective in what they buy. The company needs to earn the right to have its goods and services purchased, and it owes its customers a duty to deliver better value for money than alternatives. The customers do not owe anyone automatic purchases, or even blind loyalty. There are many competing for their reduced spend and to gain the privilege of being their supplier the company needs to deliver the right value.

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