Strategic Tactics for Growing a Business in Tough Times
“When the going gets tough, the tough get growing” – and that’s exactly what online businesses need to do in difficult times.
Whether it’s a recession, a pandemic, or just a challenging market, businesses need to be strategic in order to survive and thrive.
But scaling your business during the good times is hard enough, so how do you grow your profits when consumers are tightening their purse strings?
In this article, we’ll take a look at four main tactics that businesses can use to weather the storm and come out on top. From diversifying your revenue streams to cutting costs, from ramping up marketing and advertising to building customer loyalty, these strategies will help your business sail through tough times.
Reducing your reliance on a single product, customer base, or revenue stream helps to build a protective moat around your business. If your whole business hinges on one SKU or affiliate network, for example, your entire livelihood could come crashing down if your supplier or affiliate network drops you.
Apart from shielding your business from risk, there are other benefits to be enjoyed from diversification.
Diversification can stabilize your income by decreasing the impact of seasonal fluctuations and market changes. It can also improve your cash flow, as you’ll have multiple sources of income to draw from instead of just one. As your business grows, diversification increases your business’s scalability as you’ll have more options to tap into when it comes to expansion.
Let’s dive into the three main areas you should focus on when it comes to diversification.
Diversifying Your Products or Services
There are various ways to diversify your products or services depending on the business model you’ve chosen to operate in.
One of the most common solutions business owners turn to is launching new products or services that complement their existing offerings. This is often the simplest solution as you don’t have to stray too far out of your comfort zone and niche.
You can add variations to your existing products and services, such as color or design variations. Or you can introduce products that enhance your current offerings, such as launching home decor items to complement your furniture line.
Offering bundled products or service packages are also a great way to increase your offering while simultaneously providing more value to customers.
Remember to do your research before investing time and money into creating new products or services. You’ll need to establish product-market fit as well as do competitor and market research to determine if there will be demand for your new offerings.
While we’re focusing on diversification, ensure that your business isn’t reliant on a sole supplier. Have a backup supplier on hand or split production of your products across various manufacturers to ensure that events like the Chinese New Year or unforeseen shipping restrictions don’t derail your supply chain.
Diversifying Your Customer Base
Not relying on a single group of customers makes your business more adaptable and resistant to changes in the market or consumer behavior.
Serving a more diverse range of customers can also make you more competitive. Instead of occupying a small, niched-down corner of the market, your product is exposed to a wider audience and has more opportunities to gain traction.
Referral programs can be an extremely effective way to incentivize people to refer new customers to your business. This is a strategy that we’ve used to great effect, with referrals from our referral program making up a little over 20% of our revenue last quarter!
Incentives and loyalty programs are great at boosting word-of-mouth referrals and they also encourage customers to make repeat purchases. You could also form partnerships with other businesses, promoting their product to your customers while they do the same for you.
Depending on the product or service you offer, you could adapt your website to make it multilingual, allowing you access to an international audience.
Finally, social media and influencer marketing are powerful tools for accessing new demographics. Using an organic strategy is a cost-effective option but it will take some time to build up momentum. Paid campaigns can be quite expensive but you will get results much faster.
Diversifying Your Revenue Streams
Reducing your reliance on a single revenue stream is one of the most effective ways to protect your business during a tough economic climate.
If you run a content site, make use of both display advertising and affiliate links. In the spirit of diversification, try to work with multiple networks and affiliate partners. You could also offer sponsored posts or add a lead generation tool to your site to add to your revenue streams.
If you run an eCommerce or Amazon FBA business, you can expand into additional sales channels such as Shopify, Walmart, Faire, eBay, etc. You could also branch out into the wholesale market, selling your products in bulk to other businesses.
Another option is to add a digital product into the mix by creating an eBook or companion app to complement your product or service.
When times get tough, consumers reduce their spending, but you can mitigate the effect this may have on your profits by reducing your overheads.
If you have a good relationship with your suppliers, you can attempt to negotiate a better deal with them and work on consolidating your orders to cut down on transportation costs.
Take a closer look at your supply chain and explore the various tools and software available to help you improve your inventory management. With improved tracking and demand forecasting, you may be able to reduce your reliance on 3PL warehouses and storage facilities, particularly if you use FBA fulfillment.
Making use of cloud-based tools, AI, and automation software can reduce labor costs and save you time by streamlining operations. You can also reduce labor costs by contracting out work on a per-project basis instead of hiring full-time employees.
By analyzing your business processes and identifying areas for improvement, you can increase efficiency and reduce unnecessary spending. A good way to dig into your business processes is to create standard operating procedures (SOPs). SOPs are documents that provide a detailed breakdown of each step involved in a certain process or task. This will help you identify redundancies and help you streamline your operations.
When trying to cut costs, many business owners slash their marketing and advertising efforts, but this is often a shortsighted strategy. Marketing is what draws traffic and consumers to your business so ditching all of your marketing projects will hurt you in the long run.
Let’s take a look at why marketing is so important for your business.
Marketing and Advertising
Marketing fulfills many important roles in a business, from building brand awareness, attracting new customers, generating leads, establishing customer loyalty and trust, and differentiating your brand from competitors.
With so much to gain from marketing and advertising, it is one of the most powerful tools in your arsenal during an economic downturn.
One effective marketing strategy to employ during tough times is to focus on the value your business offers to customers. This can involve highlighting the benefits and features of your products or services, as well as any promotions or discounts that are available.
Another effective tactic is to use social media and email marketing to reach and engage customers at a low cost. These platforms allow businesses to share updates, promotions, and other relevant content with their followers and email subscribers. Businesses can also use targeted advertising to reach specific audiences on social media platforms.
Content marketing is another cost-effective way to attract and retain customers. By creating and sharing valuable, informative, and entertaining content, businesses can establish themselves as thought leaders in their industry and build trust with their audience. This can include blog posts, videos, podcasts, infographics, and other types of content.
It’s important for businesses to track the effectiveness of their marketing and advertising efforts and make adjustments as needed. This can involve using analytics tools to measure website traffic, engagement, and conversions, and using the insights gained to fine-tune your marketing and advertising strategy.
Customer Retention and Loyalty
A lot of time, effort, and money go into acquiring new customers for your business.
You have to source the customers, convince them that they need your product or service, and then guide them through completing the purchase. After all that work, you don’t want to have to start at square one again.
This is where building up customer loyalty and retaining existing customers comes in.
Retaining customers can help you cut costs by reducing the need to acquire new customers and by increasing the average purchase value of a customer.
Building long-term relationships encourages them to make repeat purchases, ensuring a steady flow of revenue, even during a recession. Loyal customers are also more likely to recommend your business to their friends and family, which can help you to acquire new customers in a cost-effective way.
Here are some ways to encourage brand evangelism and keep customers coming back for more.
Strategies for Improving Your Customer Loyalty and Retention
Brand loyalty starts with excellent customer service. Providing prompt, friendly, and helpful customer service will make consumers feel appreciated and help you build trust in your business.
Use email newsletters and social media to maintain regular contact so that customers remain engaged and your business stays top of mind. Building a community around your business through online forums, social media groups, or other online platforms is also a great way to remain connected and build long-lasting relationships with consumers.
Offering rewards and incentives, such as loyalty programs, discounts, or exclusive promotions, can help to encourage repeat business and customer loyalty. Creating a sense of exclusivity through exclusive promotions, loyalty rewards, and VIP experiences can also help to make customers feel valued and special, which can increase their loyalty.
Providing value through educational resources or helpful tips can go a long way toward building trust in your brand and establishing your business as a thought leader in your industry.
Personalizing interactions with customers, such as through targeted marketing or personalized recommendations, can help to create a more positive customer experience.
Finally, according to a study by Edelman Trust Barometer, around 88% of consumers say that trust is critical when deciding which brands to buy or use. With authenticity at the forefront of consumers’ minds, being transparent and honest in your business practices is crucial when trying to build consumer trust and loyalty.
Tough Times Don’t Have to Spell Disaster for Your Business
An economic downturn doesn’t automatically mean a decrease in profitability and scalability for your business.
With a little forward thinking, you can shield your online business from the storm and ensure that you remain flexible enough to pounce on any growth opportunities that come your way.
Building up your businesses’ defenses will not only help you thrive during tough times, but it will also boost your valuation when you eventually decide you sell your online business.
If you’d like more information about how to increase your business valuation, or if you want insights into our sales process, schedule a call with one of our business advisers.