It’s been a world record 28 years since Australia experienced the impact of a fully-fledged recession. A recession is considered a period across two consecutive quarters where GDP had negative growth. During the Global Financial Crisis (GFC) in 2008, Australia didn’t have this negative growth, though the rest of the world did suffer – it’s known as the great recession globally.
Now in 2019, the fear of a recession is growing amongst Australian businesses and households. Over the last 12 months, there’s been a decline in the property market and consumer spending. And in April, the unemployment rate rose to 5.2 percent, despite the creation of over 28,000 new jobs across the country.
The government is trying to react, as of March this year, inflation remained flat while wages grew slightly. Inflation continues to fall and wage growth remains low, while car sales have plummeted since the start of the year, which is often considered a reliable outlier of consumer confidence.
As businesses begin to question the future, market analysts and economists have begun predicting a turn for the worse. The uneasiness of an uncertain economy has been echoed by the Reserve Bank of Australia’s announcement of a 0.25 percentage point cut to interest rates at the beginning of June.
While the Reserve Bank of Australia places pressure on the big four banks to follow through with the cuts, they are also hoping it will force the Australian dollar lower to assist export income and make local industries more competitive. As of June, 2019, the Australian dollar had been at its weakest against the US and trading near its lowest level since 2016.
So, it is natural for businesses to begin assessing their income and expenses when times are tough and an uncertain economy is amongst us. During this time, businesses normally rely on two levers to pull; either cutting costs or increasing turnover.
Before the going gets tough, ensure your business is secure and your bottom-line is protected. From keeping your team engaged with your business at all times to pushing your brand to a new audience and protecting those who keep your business afloat, we explore the areas for you to grow in, when it’s most challenging to do so.
Here are three ways you can protect your income during an unpredictable economy:
In times of economic uncertainty when consumer confidence is down, market level growth becomes harder to predict and irresponsible to rely on. Instead the onus is placed on businesses to drive growth, often by stealing market share from competitors and leveraging discretionary spend by stimulating brand switching.
During these periods, it is often the business that best motivates their sales team that win or depending on your supply chain, the sales teams of the retailers, distributors or wholesales that sell your product. Staff are the most expensive part of running a business, but they are also the source of value and have the power to influence the sales outcomes that your business achieves. During times of uncertainty, cutting costs while boosting staff engagement isn’t easy to achieve, but can provide you with the edge that can prove decisive.
Indeed, the companies managing to do both are the ones that survive the rough patches and come out on top in the end. At a time when morale is down and sales are suffering, motivating staff through an incentive program has proven to be beneficial and effective for many businesses.
Incentives are an innovative way to rejuvenate your sales teams or the sales teams of the partners that you use throughout your supply chain to sell your product. When executed well, they’re shown to increase productivity and overall sales. While incentive programs won’t necessarily help grow the market, they will guarantee you an increase in sales profitability as they provide you an avenue to steal shares from your competitors.
The best part about incentive programs is that the costs can be covered by the incremental revenue that the programs generate. In this regard, they’re known for being low risk, high gain, fully measurable and completely self-funding concepts. The Upside Only model, which is executed by Incremental, means the overall program is self-funded from the incremental margins they generate.
Ultimately, this means that you only ever fund rewards or prizes after growth targets are achieved by your team. So, the more engaged and motivated they are to reach their final goal and earn their once-in-a-lifetime reward, the more revenue that is pocketed for your business.
When deciding to cut costs, many businesses reduce or completely cut back their marketing budget. While many businesses fall for this trap, tough times are often when you need your marketing strategy and associated funds the most.
During times of uncertainty, your customers and potential customers become restless and begin to search for new services or products that can grow their own revenue streams or save them money. By having your brand out in the marketplace, it provides you with an opportunity to deliver these potential customers information about your business and services, that could then influence their behaviour.
Before making any drastic decisions in relation to your marketing plan, conduct a review on your current marketing strategy and also the current activity of your competitor set. By doing this, you can make informed alterations by using your collected data and come up with new ideas to increase sales and find better ways to utilise your budget.
For example, you may decide it is time to cut back on traditional marketing and inject more funds into digital to make the most of the improved measurability and flexibility in terms of how you spend your budget and who you want to target. The use of digital marketing allows you to place your business in front of an individual who has shown an interest in services that you have on offer. By using the right data, you can ensure your advertisement or content is posted in the right place, at the right time.
Remember, never stop marketing your business. If people don’t know about your business, its products or services, how can you expect them to want to do business with you?
Over the years, numerous studies have found that nearly one in six well-established businesses have encountered financial difficulty after the loss a single client. That’s why maintaining a focus on building your customer base is important.
From the old-school way of picking up the phone and working your contact book to marketing your business across multiple channels; each avenue provides you with an opportunity to build your foundation. Better yet, find the pain points your target audience is currently experiencing and show them how you can help solve them through the use of your services or products.
And while it is crucial to ensure you have new business coming through the door, it is also critical that you don’t neglect those who have already invested in your services. So, start brainstorming ways you could potentially influence them to not only continue the partnership, but also expand.
It is also significantly cheaper to market to people who are already aware of your offering. This is the time to remind your current customers that there are reasons why they have chosen you over your competitors. If it is for your faultless product, remind them why they just can’t get enough of it. If it is your staff’s attention to detail and the customer experience, ensure that standard of quality remains and continues to act as a key differentiator.
If you provide quality customer service that makes your customer feel like they are a V.I.P to your business, you’re more likely to retain them. This also opens up a greater opportunity of word-of-mouth marketing, meaning you have the possibility to increase your client base thanks to your reputation.
Conclusion: So, when the going gets tough, take a step back and review your business at a high level and from a far. Put measures in place with an incentive program to influence motivation and engagement within your sales team and conduct a marketing audit and strengthen the strategy to ensure it includes methods to retain and broaden your customer base. By implement growth strategies while competitors are cost cutting, a market downturn can represent a huge opportunity for any business.
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