Which of these economic changes do you think pose the greatest danger to your business…a rising economy or a declining economy?
Long-time readers know my penchant for counterintuitive thinking and have already guessed that it’s the rising economy. Let’s explore why that’s true.
Danger: Rising Economy
It’s in good economic times that buyers, whether individuals or businesses, have higher levels of cash which leads to greater discretionary spending.
Business owners see interest in their offerings coming from previously disinterested quarters. They also realize that while there is new interest, these buyers are not willing to pay full price. Yet they know that the demand from these quarters far exceeds the discounting they have to do to make the sale; consequently, they lower their price to generate additional sales.
As they succeed in selling to these markets, they expand their infrastructure to handle the additional volume. What they don’t realize is that when the next shiny object appears or the economy reverses direction, these buyers are all going away, which means that they are trying to support the expanded infrastructure with lower margins. It could take years to recover from this mistake…if recovery is even possible.
Takeaways
Businesses that thrive in both good and challenging economic times are the ones that adopt a premium-price strategy…a strategy that focuses exclusively on their ideal customers. As was discussed in earlier posts, your ideal customer is someone who values what you offer so highly that they’re willing to pay a premium to get it…in good times and bad. In fact, they will forgo other spending in a down economy to be able to afford what you offer.
For insights into how you can identify your ideal customer, I direct your attention to these blog posts: Debunking “Numbers Game” Myth and Attracting More Ideal Customers.
Focusing on your ideal customers…in good economic times and bad…enables you to thrive regardless of what the economy is doing.
If you enjoyed this insight, please share it with friends and colleagues. They’ll appreciate that you’re thinking of them.
Resources
For a complete overview of Greater Profit/Fewer Sales concepts, check out Dale’s books, Pricing for Profit and Generate Greater Profit With Fewer Sales:
Even More Profitable training programs assure that your organization enjoys the benefits of being a Greater Profit/Fewer Sales organization.
Leave a Reply