Link to El Nuevo Herald column in Spanish: Here

We all know that the economy is cyclical. If you wanted, you could spend hours analyzing data and charts that track everything from the Future Inflation Gauge (FIG) and Leading Home Price Index (LHPI) to the U.S. Weekly Leading Index (WLI). Understanding the triggers that influence how our economy acts, and reacts, is important for a business owner’s strategic decision-making process, but the bottom line is this: The economy fluctuates up and down over time and, since business is inextricably bound to the economy, it too will fluctuate over time. This fundamental reality poses two recession-related challenges for the business owner. The first challenge has to do with the strategic decision-making process I eluded to above. Proper planning and forecasting is critical to not only minimizing the negative effects of a bad economy, but actually helps many companies succeed despite a recession. In fact, many companies reach new levels of success as a direct result of a recession because they strategically position themselves to take advantage of resulting opportunities.

While the first challenge related to market fluctuations has to do with the strategic planning and forecasting process, the second challenge to the business owner involves successfully navigating the organization through the subsequently turbulent waters. No matter how well we may have prepared for the current economic crisis, many of us, myself included, find ourselves dealing with and reacting to changes brought on by the recession on a daily basis. One change, in particular, must be dealt with carefully as it tends to undermine an unwitting organization’s ability to earn new business despite its best effort. The change I’m referring to is the switch so typically seen in a recession from “product differentiation” to “price” as a consumer’s primary basis for making a decision between you and your competitor. Let’s face it, during a recession, price rules. The question is, how do we deal with it?

Product differentiation and price are the two most basic routes for forging business strategies. All other business strategies flow from these two points. Companies that focus on differentiation showcases the differences between their product and a competitor’s. They sell the value of their product as they contrast their unique qualities with other competing products and seek to create a competitive advantage for themselves as customers view these products as unique or superior. But in a recession that competitive advantage is nullified as customers focus solely on price. At times it may seem that customers don’t value the value you have to offer, and that your product, no matter how superior you feel it may be, is treated as a commodity. At that point business owners must reevaluate their approach to sales and strike a balance between product differentiation and price to ensure they can compete without sacrificing quality.

Cut Costs: I have often stated that recessions have a way of reminding us that we can always be a little more efficient, a little more frugal in how we do business. Cost cutting is necessary to ensure that your price points are as competitive as possible lest you find yourself cutting from your margin – which may prove to be necessary as well. Cut costs without cutting quality.

Cost Recovery: Since price is such an important factor in your customer’s decision-making process, Cost Recovery can be your most convincing sales point as it focuses in on both price and differentiation. Cost recovery is about gaining maximum leverage per dollar spent. Your product may be a little more expensive than your competitor’s, but if you can quantify how your customer will recover his cost more advantageously with your product, you will have satisfied both his needs for quality and price.

Schedule: We’ve all heard the saying, “timing is everything”. In business, this is especially true. All too often it seems that schedule is just as important, if not more important, than price. Remember your customer is being affected by the economy just as you are. How can your product and/or your delivery method improve your customer’s circumstances in the midst of the recession? Often times having a competitive schedule doesn’t simply imply speed – getting it done fast, but timing – delivering your product conveniently and precisely when it’s needed.

Client-Specific Needs: Is there something specific that you may know about your client’s needs or wants that your competitor may not know? Addressing specific needs is a way of differentiating your product from your competitors without sacrificing quality. Be aware, however, that the opportunity to address your client’s specific needs may not come in the form of your product, but in your approach to doing business with that client. It may be that your system for billing is more advantageous to your client than your competitor’s system. The more you know about your client, the better. In fact, addressing specific client needs may be the final determining factor that gets you the contract.

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