People around the world are living through challenging times. The particulars vary with each person; some have lost jobs, while others have lost loved ones. Others have simply lost the opportunity to go out and interact with their fellows on a regular basis. One thing we all have in common is the burden of anxiety stemming from this uncertainty we face.
Businesses also face similar concerns of anxiety. It’s essential to keep things in perspective; after all, profitability can’t take center stage when human lives and public safety are at risk. Still, leaders need to make tough decisions now. This is especially true of small businesses whose very survival may rest on how they respond to the pandemic and whatever emerges as the new normal. Here are some reflection points to help guide you through anxiety and make strategic decisions moving forward.
Bigger isn’t better
A disruption like the current pandemic is rare, but its impact can be felt everywhere. Nonetheless, the effects are not uniformly distributed, especially in the realm of business. Some companies weather the storm, while others lose their way. A few may even grow from this event. Is it all down to luck, or are there some moves you can make to swing the odds in your favor?
Most professions have a large element of stability. Introduce disruption to the workplace, and they can fall back on tried-and-tested personal skills. Simple and versatile tools such as plastic measuring cups lend themselves to quick improvisation. It’s easier to make the necessary adjustments on a micro level.
Entrepreneurs and leaders, however, operate on the macro level. You have to deal with moving, unpredictable parts: human beings, workflows, and systems. Complexity increases with scale and size. At some point, it’s hard to tell what might happen if you make small changes. The risk of failure increases.
In this sense, simply running a smaller outfit works to your advantage. Scaling down to your core operations allows you to be inherently flexible. You’re better positioned to experiment, see how things work out, and commit to operating in a new way.
Understanding consumer behavior
What actions can you take to improve the position of your business amid market changes and uncertainty? To make smart decisions, it’s vital to understand how consumers might change their mindset during these times.
A study by Harvard Business Review in the wake of the 2008 financial crisis offers some valuable insight into consumer behavior during a downturn. From this perspective, people will generally fall into one of four categories. Those with lower income or high anxiety tend to ‘slam on the brakes’ when it comes to spending. The majority of people will take a ‘pained but patient’ approach to spending; they become more frugal, but not as aggressively as the former group.
Two other groups of consumers will continue to spend, however. The ‘comfortably well-off’ have higher income and greater financial stability; they may alter their spending selectively, or make an effort to be less conspicuous. Finally, the younger demographics will tend to ‘live for today’ and maintain their usual spending patterns.
Depending on which group they fall into, people will prove more or less likely to spend on indulgences or expendables. Essential spending remains constant, but consumers are more likely to forsake brand loyalty and seek out alternatives or favor discounts.
Knowing these consumer behaviors, what segment does your business cater to most? Rather than slashing spending across the board, you can actually increase marketing expenses to engage with consumers in anticipation of their behavior shifts.
Historically, periods of downturn often turn out to be fairly short-lived. Economic recovery and the corresponding positive shift in consumer behavior may take a year or two. Thus, it’s critical for a business to keep one eye on the long-term outlook, especially when it comes to consumer perception.
In difficult times, people seek positivity. And with the added factor of social isolation during this pandemic, a human touch is even more necessary. Across the globe, brands are responding by taking this into account. Communications are no longer centered on their products and services. They are putting their efforts into creative ways to help the community, their employees, and even other businesses in the same industry. The message that we’re all in this together is one that resonates and strengthens their connection with consumers. How can you take similar action and leverage your business to help others?
Brand loyalty will fade into the background when consumers have less disposable income to work with. But it’s still there, and when things are looking up once more, you can reap the rewards of continuing to build a strong relationship with your audience.