Most people's first reaction to a financial storm is to become wholly risk averse. But the recession hits the risk averse really hard. It's an unpleasant paradox, and it's fact.
Analyse it at any level and you'll see the truth. Private money is "safe" in banks, but is currently earning nothing.
Keep your head below the parapet in your job and you won't achieve your goals. Not achieving your goals puts your job on the line. To achieve your goals you have to stretch. That's what they're for. And, unless those goals are to trade in securitised sub-prime mortgages, then you need to reach them.
But the first reaction in a recession is to batten down the hatches and to sell to your existing customers. To "minimise business risk" and to reduce cost of sale.
I have bad news for all of you who think that selling to your existing customers is the best strategy. You are going to be made redundant when your orgainsation goes to the wall.
That can't be right, can it?
How good's your foresight? Let's see.
You have a sample base of 100 customers. Doesn't matter if you're B2B or B2C, they'll react pretty similarly:
- Do we need a new widget?
- Can we get by on cheaper widgets?
- What if we delay buying a new set of widgets until we get some upturn in our own business?
- Do I need that service contract for my widgets any more?
- I'm only selling to my customers, so my widget needs are lower now
- Sorry, we're Woolworths, we went bust.
Ok, some of those are B2B only, but you get the drift. And the drift is that those 100 customers, while cheap to sell to, suddenly are doing less business with you, and, because you are staffed up to handle 100 customers at full demand, you are overmanned, so your cost of sale and service actually rises.
What is your downturn in business from your customer base? As little as 10%? Or 50-60%?
Your risk averse strategy is the highest risk to your business that there is. You're selling into a shrinking market. I don't care even if you're gaining share of that market by outselling your competitors into your base, it's shrinking because it just contains your customers.
So, what can you do?
I'm tempted to suggest a knee jerk reaction of allowing those who prescribe a risk averse strategy to go and help you by working for your competition, but they aren't hiring right now! be wise. Retain these people, or as many as you can. They tend to make great farmers of customer bases and excellent customer service agents and managers.
"Get a grip, Tim! Didn't you say that farming was actually high risk?"
No. I said that just farming was high risk. We absolutely need our customers. Deserting them now would be suicide. And we do need to increase our own share of that declining market in order to provide the war chest to do what we always need to be doing:
Getting new customers.
When's the best time to cut a deal with a new customer?
When they need your product, your service the most.
And that's when they're already hurting.
Those folk who need to find cheaper widgets: Can you meet that need? Can you supply a cheaper widget? If you can, and if their credit checks out, then you have a new customer.
Those folk who really do want a widget service contract but can't afford it: Can you put a bargain basement deal together and grab that business?
Is this really any different at all from trading in a normal market?
Of course it isn't. So why have middle managers all taken leave of their senses and are hiding below the parapet and not creating excellent, low risk, high impact offers to get new customers?
If you can't get them when they really need a great deal, how on earth can you survive in more normal market conditions?
Are you still reading? That's it! No gems on how to do it. You have to think of those. So go out and get selling to new customers. This is the time for new business. Last man standing gets the prize!