Every week stories abound about Australia’s stalled economy, wage growth freeze and the housing crisis – yet Australians seem to be happily committing to the highest debt in history thanks to low interest rates. The latter might be good news for home repayments, but consumers are increasingly concerned with fuel prices, energy bills, tolls, parking and fines and are feeling the pinch.
Small business owners need to be acutely aware of the bigger economic picture. It’s in these times that customers might turn to ‘bargain’ stores in lieu of quality products or services – the battle to prevent this happening and to hold on to your customer base is on.
Business coach and entrepreneur Matt Malouf says consumer behaviour is inextricably linked to the economy, and small business needs to be prepared for it.
“Uncertainty makes people jumpy about spending money,” he says.
“The economy has an impact on consumer behavior – for better and worse. The challenge is that business owners fall victim to this as opposed to focusing on the fundamentals of running their business. Consumers continue to buy products and services irrespective of economic conditions.”
Malouf says it’s easy to run scared when times get tough, but the best way to combat fear is to concentrate on not only retaining your current customers, but growing your base via a solid strategy.
“Small businesses often become quite reactionary during these times and as a result do not think strategically enough about marketing and selling their goods and services,” he says.
“It is essential to combine good strategy with tactics during these times.”
One easy way to do this is to add more value, he advises.
“Ask yourself – what does your customer need and how can we deliver this to them? Focus on the little things also – raising your levels of customer service, making it easy to pay for your products and services however the customer chooses, getting to know your customers and ask for reviews and referrals.”
Malouf says the absence of a clear strategy to combat economic downturns is a common mistake small businesses make, along with cutting marketing budgets and slashing margins by discounting to the point of no profit.
“My recommendation is now is the time to market and to engage specialists to assist so your product or services stand out from your competitors,” he says.
Anthony Pitt, founder of men’s fashion startup The Academy Brand, has been there, done that when it comes to building a business through tough economic times, and has some valuable insights to share.
Pitt started his business in 2007 when the GFC was in full swing and business confidence was pretty gloomy – it was a less-than-ideal time to launch but Pitt says his own self-belief, and a healthy dose of risk management, got him through.
“I started The Academy Brand because there was a gap in the market, a huge opportunity,” he says.
“I was so confident in my business concept that nothing was going to get in the way, including the economic downturn. At the end of the day a good idea is a good idea.
“Of course you still need to be measured and make considered decisions. Truly believing in what you are doing goes a long way to mitigate the risk. If you start worrying too much about external forces, your decisions become more about them than your business.”
Pitt worked hard to get his clothing brand into a local store in Bondi Beach and, when it was picked up by David Jones, the business snowballed and he has been able to open up several retail stores as well as grow his online sales to create a business with a $10 million-plus turnover.
He says the best way to retain customers is to create an experience for them – which in turn creates loyalty, even when money is tight.
“Engaged customers stick with you because they love what you do, that’s why they come back,” he says.
“Through consistency you earn their respect and trust. The brand means something to them. It’s not just a product. Customers are more than happy to pay a tad more if they are getting something in return.”
Like Malouf, Pitt says it’s a mistake to run and hide when the economy slows and fears about changing consumer behaviours rise. He says it’s the best time to really hit the ‘go’ button.
“Talking from my own experience I would say during difficult economic times the opportunities can become greater,” he says.
“My biggest tip would be ‘Don’t stop’. When others take the foot off the pedal you have the chance to overtake them.
“When consumer confidence is down, make sure your confidence doesn’t follow suit. Do more. Get better. Get busier. Back yourself and your business. Don’t sit back and try to ride out the storm, take it on. Be smart, but take it on.”
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