With the recession deepening, customers’ wallets are slamming shut. Companies that historically sold premium offerings to drive profits can no longer rely on this tactic. Instead, they must provide cost-conscious buyers with more value for less money.
Peter Williamson and Ming Zeng write in the Harvard Business Review that value for money has become a strategic imperative—and not just because of the recession. Even before the slowdown began, there were signs that it ought to be a major consideration for companies. In developed countries, increases in household income over the past decade have favored the top 20% of earners, while the spending power of most families has stagnated or declined. Many people in the United States, for instance, have found it difficult to maintain their standard of living after paying for such necessities as their mortgage, transport, utilities, and health care without borrowing money. More recently, small salary increases and the steady drumbeat of job losses have turned many consumers into value shoppers, as they tighten their belts.
No one needs convincing that the economic situation we’re facing today is almost unprecedented. Yet much of the advice that executives have received is remarkably similar to what they heard during the recession in 2000. Particularly in Western enterprises, the preferred antidotes seem to be standard ones: Evaluate your risks, develop contingency plans, focus on your core, reduce costs, expect the unexpected, and so on. The unspoken objective appears to be to survive or, at most, to maintain market share.
Read more at Harvard Business Review