The primary goal of a typical organization up against tough tactical choices is to outlive a financial slump. The organization should remain committed to its business plan, and find balance in generating profitable income and lowering costs. The goal should be to uncover strategies to reduce costs without cutting out vital revenue producing expenditures. I hope to be able to offer you a few of these opportunities, as possible ways of keeping gross profits up, during short-term cycles of an economic downturn.
Bringing in Client Referrals As a marketing and advertising consultant, I am frequently astonished by the empty stares I get when I ask a client: “How many referrals did this company produce last month?” If they know, it is never something substantial, since little effort is dedicated to the cultivation of this revenue source. Generating customer referrals, especially targeted at repeat purchasers, is a skill of salesmanship, that appeared to fade away with the invention of computers as well as the Internet. Every business has a cost per sale metric they are comfortable with. Your sales staff, your customer support department, your email campaigns, as well as the home page of your website, are all touch points to advertise a customer referral program. Just take your cost per sale figure, divide it by 3, and use that amount as a referral promotion. It is a low-cost way to obtain customers and new income. A properly maintained referral plan may contribute 2% to 5% to your gross profit.
Customer Retention Plans I tend to get the exact same blank looks when I ask clients: “How many former customers did you reactivate last month?” Just like making referrals, this is a sales technique which has almost been forgotten. For every single customer you lose, you must find two new customers, to be able to grow your business. Normally, customer retention is simple if you take the time to understand why these people no longer use your company. You are likely to hear isolated incidences related to shipping difficulties, a rude customer care experience, and merchandise, which failed to satisfy buyer expectations. All you have to do is address the matter and fix the problem. Your client will be happy their business seemed important enough for you to make contact with them. A properly managed customer retention plan can add an additional 2% to 5% to your gross profits.
Strategic Retail Pricing Most companies work with a flat rate method for determining their retail prices. In good times and in bad, I am a huge supporter of strategic retail pricing. I do not have faith in lowering prices, and margins, during sluggish periods to generate revenue. Strategic pricing is all about advertising and marketing the value of your products and services. A best selling product is worth more when it has greater customer value. Before lowering selling prices on weaker moving goods, examine how the product is being presented. Does the product have a great sales story that underscores its worth? Is the art of professional quality and engaging? Your sales presentation may need a tune-up. Packaging multiple best selling items into special offers is another great way to raise average order value. Like you, buyers like to get value for their dollar too. Strategic retail pricing can help improve your gross earnings between 5% and 10%.
Negotiate with Vendors Vendors feel the identical financial stress as merchants, but on a greater level. If you, and your industry is selling less, so is your vendor. This empowers you to work out a better price since it suggests to the vendor you will be willing to shop around, but you would like to give them the opportunity of first choice. Can you save 5% with a pre-pay discount? Might you get some cost relief on components of the product line for promotion? Ask your supplier how they can help you to keep them as a business partner, and allow them create offers to you. Focus on at least a 1% increase in gross profits whenever you negotiate with your distributors.
Employee Downsizing In some cases, this might end up being the only choice you have to lessen company expenses. I do want to emphasize the word expense. Your workers can easily be broken up into two categories: Overhead, and revenue generating. Sales agents and marketers generate revenue. Many of the steps described above would be hard to carry out without sales and marketing staff. A few states offer a partial unemployment program where you maintain staff three days a week, and unemployment compensates your employees for the other two days of the week. Always be sure to think through all of your possibilities, and their implications, before you act. Teaching new employees is less desirable than maintaining knowledgeable and trained existing staff. You might save a dollar today, and lose two down the road with the growing pains, and learning curves, usually associated with hiring new staff. If you do downsize, be sure to create, or update, a company organization chart so everybody understands their new assignments. Effectively downsizing your personnel should have a favorable impact on gross profits, and you should be able to prove that to the CEO on a regular schedule.
Improve Employee Efficiency and Production An employee may commit up to 25% of a workday making use of company computers and the Internet for personal use. They shop, chat, email, search for jobs, go to Facebook, and keep track of their fantasy sports leagues, just to name a couple of examples. I have personally seen email analytics showing 75% of buyers responding to the email, are purchasing from their office.
Some of my suggestions are old-school, but this one capitalizes on the most current technology. OfficeShield is an inexpensive employee monitoring software program which you may install on your network. It will tell you precisely how many hours a day your employees are not working. It can also block and prevent accessibility to personal use websites. If you add up your payroll and discover a decrease of just 12.5% (an hour per working day) in employee performance, that converts to some substantial weekly dollars, that should go straight towards increasing your gross profits.
Of course, there are no vanilla or chocolate answers to the difficult challenges that a company faces as it tries to sustain profitability during a financial downturn. However, if you discover and evaluate problems, create options, plan and apply actions, and assess the efforts of your work, your organization is a lot more likely to keep and strengthen gross profits.
Craig Corbel is an Online Marketing and Strategic NYC Web Design consultant for small businesses nationwide. Find out more on Employee Monitoring Software by visiting Office-Shield.com and installing their free demo.