The headlines are tumultuous as the negative economic metrics seem to be outdoing themselves. The inflation rate is steadily rising, companies are downsizing, the unemployment rate is on the rise, the crude oil price is not steady, and the exchange rate is unpredictable. There is an economic crisis and the nightmare is all occurring at the same time.
The aftermath of all these and the uncertainty that comes with a slowing economy resulted in a drop in disposable income. Most purchases have become an economic decision as opposed to a utility decision. Consumers are beginning to strive for goods and services that lay emphasis on value for money. Even brand and consumer loyalty aren’t left out as there is a shift in favour of cheaper products. It is important to note that the current environment is not accommodating price increase considering that consumers are ready to make a switch. This is a situation we refer to as an economic crisis.
Financial results trickling prove that the lingering macro challenges are taking a toll on consumer discretionary spending.
The aim of this article isn’t to raise concern as there is a silver lining in all of this.
How does an SME plan to leverage the changing consumer behaviour? In what ways does it plan to position itself as a competition of substitute value brand? How is it planning to capitalise on the general weakness in the macroeconomy which is affecting consumer discretionary spending?
Luxury and high-end products are usually the first to get hit as consumers are changing their spending patterns. The underdogs can seize the opportunity to push their brand by offering value for money. Catering to the needs of the market by meeting the key needs of the consumers and cutting out excesses. For instance, in the brewery sector, manufacturers are turning to their value-for-money brands to save the day.
How are SMEs positioning themselves to steal profit from the pool to be a substitute product that will fulfill the needs of consumers who can’t keep up with the more expensive brand? Have you considered getting more visibility for that product, now that consumers are eager to try out new or young brands?
As a business owner, you must have heard the expression: “The customer is always right.” And this brings me to my next question?
What are your customers saying? What do they want?
In the midst of a slowing global economy and with many companies releasing a profit warning, McDonald’s defied the norm as it posted a growth in sales thanks to its All-Day-Breakfast which it rolled out in 2015. Many McDonald’s fans had been calling on the company for years to make Egg McMuffins, hash browns, and other early morning treats available at lunch or dinner time. It finally listened and the menu change clearly paid off for it.
There isn’t a better time than now to make those changes that your customers want.
Other strategies to employ in an economic crisis include:
Stealing the profit pool by creating a new demand.
Ola Ola, a Nigerian agro-processor, pioneered the processing of yams into powder to make pounded yam as a substitute to the pounding of raw yam.
Breaking existing products into compartments
Some customers might want the full package while others might want just a piece of the action. Price it right and scale. Promasidor, the makers of Cowbell, started economic packaging for the lower-income demographic at affordable prices. This pioneered a breakthrough mass-market product and created one of the most successful fast-moving consumer goods (FMCG) company in Africa.
Reviewing prices as well.
Are you passing dead weight to customers? Are you inefficient with your processes? Why not restructure to cut costs, this decline in costs can then be passed on to customers. This way, they get to pay less for the same unit of goods or service. AJE Group, a multinational beverage company with headquarters in Lima, Peru, has started the production and distribution of Big Cola. To entice Nigerians and create loyalty, the company said it is offering the consumers more quantity and quality products for a smaller price.
How about leaning in to produce some complementary products
Products that can leverage on your existing investment and keep the revenue streaming in. For instance, Burger King, a dominant player in the burger space, has the latest menu item – grilled dog. This is its attempt to take a bite out of the enormous hot dog business.
The toughest part of any strategy is execution. So, if well-executed, not only will this set your business apart in a season of drought, it will also give you an edge in the days of plenty (when the market rebounds).
Exciting times are here; a time to be innovative, to be dynamic, to solve the problem at hand with lean costs. This should drive traffic that companies set in their ways will miss out on.
Life is cyclical. Everything is cyclical.
Reinvent in an economic crisis to stay in the game.
Let’s create visibility for your brand and put your business on the world map. Contact us today to make your brand the preferred choice for our audience of entrepreneurs and business leaders.