In A Down Economy, Add Value

Apr 8th
posted in

When an economy is booming, companies can risk being sub-optimal.

They can get away waste and inefficiency. They can get away with providing less value, because customers aren't as focused on the bottom line as they are when cash is tight.

In a down economy, it is less likely people will be prepared to pay too much for things they don't really need.

So now we're in a down economy, how will things change? What can the webmaster do to adapt to these changes?

Here are a couple of interesting articles:

One on Gapingvoid.com, which predicts a return to value. Another on UnlockTheGame, where a 96 year-old ex-business woman talks about what happened during the last depression.

.... I remember seeing bankers standing in their fancy suits at street corners selling apples......there are millionaires made in good times and in bad times.so the lesson there is the "times" have nothing to do with it.......If you're going to read the news, it's important to read it separating yourself from it. .....Read between the lines and look for the silver lining, because behind every negative news story is a turnaround success story waiting to happen.

While the Gaping Void article makes a number of broad assumptions, the important points of those two articles are that things are going to change, and where there is change, there is opportunity.

So where is the opportunity going to come from?

The Gaping Void article points out:

It was quite a disconnect for me to hear the guys on CNN yapping endlessly on about THE RECESSION, in contrast to all the groovy cats I met at SXSW, who told me how their businesses were booming. It was like two alternate universes colliding. Which one was the real one?"

Been hearing those stories a lot lately? So have I.

It is probable that traditional marketing money (i.e. television, radio, print) is shifting to internet channels, because the internet is seen as providing better value. Also, people may use their cars less often, and shop on the internet to save money. Bad for brick n mortar retailers, good for internet stores.

The UnlockTheGame article talked about surviving the last depression by adding value i.e. selling a freezer stock full of meat.

A good approach in a down economy, especially for the little guy who seldom does enough volume to compete on price alone, is to think about ways to add value.

It is good we're in the internet game :)

How To Add Value

1.Re-Focus On User Needs

What do users really need? As money gets tight, people focus more on their needs than their wants. If you're selling a "want", can you twist it round into being perceived as a need?

For example, one of the first areas to get cut from corporate budgets during a downturn is marketing spend. But a company still needs to talk to consumers. If you sell internet advertising, you could address this need by comparing various channels i.e internet vs tv/radio/print.

Frame your message in terms of results and benefits. In a down economy, positioning is often a lot less important than the bottom line.

2. Segment Your Market

Typically, the wider your market, the more average your service or product. By being all things to all people, chances are you aren't delivering excellent value to some.

If customers are more driven by excellent value because cash is short, the generic products and services may miss out to a competitor more focused on a segments needs. Look for ways to segment your existing market.

3. Improve

Can you be more timely? More convenient? More accurate? Can your offering be customized? Can it be made more usable?

What more can you do for people?

4. Seek Feedback

Your users and customers know what their needs are. Do you make it easy for them to tell you? Ever asked them about it? How do you currently evaluate their needs?

5. Partner

Are there opportunities you see, but can't act on because you don't have the resources? Does someone else have those resources? Are there opportunities to partner up to create more value?

How about within your own company? Is every member of your team focused on providing customer value? Make every team member a partner in the adding value process.

6. Assess The Value Of Existing Relationships

It might seem like a strange time to cut customers, but the customers that aren't making much money present a huge opportunity cost to provide real value to someone else. Assess which customers make you the most money and focus on their needs. What extra value can you create for them?

Published: April 8, 2009

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Comments

April 9, 2009 - 2:31pm

Definitely a case of two worlds colliding...offline and online.

And we're still in the infancy stages.

Just wait until TV become truly interactive and billboards/posters are made out of touchscreens instead of paper.

April 10, 2009 - 10:04am

Very Useful, thank you Peter.

April 11, 2009 - 3:14pm

Regarding how the news is being presented in the media, Perry Marshall has an excellent video he posted on his blog not too long ago.

http://www.perrymarshall.com/bite-the-hand-that-feeds/

The first half of the video is a bit of an unrelated rant, but at 9:15, he gets into his perspective on the news media and why they're so full of doom and gloom.

"The people who are reporting the news to you are the very class of people who are most negatively impacted by the current economic situation and by the internet. Those people, the people who tell you what's going on in the world, those are the most threatened. This is no trivial thing. It negatively colors everything that's going on. So even though not everyone is doing badly, they will make you think they are."

That's the gist of it. Plenty of people have made similar remarks. I see plenty of businesses large and small who are having a rough time, but I see an equally large number of businesses that are thriving better than ever before.

People have this skewed understanding of how economies function, believing that things are always supposed to go up. But the downs are necessary to clear out the hacks, charlatans and mediocre vendors.

I smile inwardly when I see businesses fold because I know creative destruction is a good thing. I empathize with the strain this causes the business owners and their employees> But if the problem was the business and not the people, then the people will move on to new and hopefully better business ventures.

April 11, 2009 - 6:33pm

I totally agree Dan. Evolve or die, and the increased competition from the web is going to require faster evolution and greater value add.

Too bad the US government does not believe in creative destruction and let the incompetent banks destroy our country's books. Banks are not selling much of their foreclosed properties because they think they can sell it to the tax payers for 84 cents on the dollar, the government is already a couple trillion in the whole, and now Wells Fargo is going to report a record quarter...absolutely worthless.

April 11, 2009 - 5:00pm

Some really great points in this post. I think now's a great time for "fat" business with poor processes to take an inward look and, as you say, add value.

April 11, 2009 - 10:10pm

Don't be a fatalist, Aaron. :p

Even if everything built by our predecessors collapses around us, we still have the same opportunities to thrive. The only people hurt by a crumbling ivory tower are the people in it and those too slow to get out of the way. What Hugh Macleod has to say about those who make their living off the "Ignorance Premium" applies here.

Tim Ferriss polled his Twitter followers to find out what companies started in a recession and came back with this list: http://twitter.com/tferriss/status/1493879042

Quite a few, it seems.

People don't stop needing goods and services just because the currency gets debased. Alternative forms of currency sprout up. Money is just an idea that we all agree to participate in. If the U.S. dollar crumbles, trade will still occur. Might fall all the way back to bartering, might not. And interstate commerce (heck, even inter-town) might be awfully difficult for a while.

But sooner or later, to get back to your point regarding the US Gov't and big bankers, the bad will get flushed out. Just have to see how much good goes down the drain with it. At least I don't have to walk down the street worrying about being eaten for lunch by a hungry carnivore higher up on the food chain.

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