All of us are aware of changes that are occurring to business landscape. Some are thriving out there while others are simply being forced to close their doors. The interesting thing is that business failure is not specific to one type of business or based on the time that business has been in business. These days an inability to market can make take out even well established businesses just as easily as it can a new business.
So let’s take a look at one business sector that is very competitive and see what we can learn from their experiences.
On July 02, 2009 the Silicon Valley Business Journal announced the closure of two local restaurants that had been around for 10 years. As the article and many comments that followed suggested these were the two latest casualties of the worst economic recession this country has seen since the depression.
However, on July 31, 2009, the same newspaper announced that Morton’s Steakhouse (located about 3 blocks from the other two restaurants mentioned above) is expanding its private dining space “to ensure exclusive parties are not turned away”. Now one of the restaurants that closed their was also a steak house.
Given the proximity to Morton’s it is not necessarily due to location or the fact that people are not willing to dine downtown. There must be some other reason why one is expanding and the other is closing down for good.
Similarly I went out to eat with my family this last weekend and I found local Campbell restaurant “Aqui” filled with customers. Then the following day my family and I went to Vietnamese restaurant,”Thien Long”. There the line to get in was literally out the door.
As was mentioned in the two part post “How to chose a business in a down economy“, today more than ever the need for accurate market research is critical to the success of any business.
No longer can a business survive simply by trying to imagine what their customers want. It is all about the customer and only the customer. The days of consumers spending freely and without care have disappeared along with credit lines and credit cards.
Even some of the affluent are pulling back on their discretionary spending and this is beginning to even have an impact on many New York hot spots. A recent video from the Wall Street Journal on Hollywood trends reported that celebrities were cutting back on frequenting some of New York’s clubs. The same report stated that many wealthy persons were pulling back on showing off their “bling”.
Now this was not specifically due to any strains on budgets, or a move to frugality. Rather, these affluent buyers did not want to appear to be flashy and insensitive to the economic challenges of the nation. They did not want to be targets of hate for their wealth and lifestyles. So they were toning it down. This has a direct affect on those business that relied on their free spending.
So, given these changes in trends and attitudes what can any business do to survive and eventually thrive in this economy?
First, you need to provide more than just good products and service. That is an expectation from the consumer and no longer differentiates a good business from a bad one. Secondly, consumers are looking for a complete experience that maximizes the value of the money they are spending.
A prime example of this is BJ Wholesale Club (similar to a Costco or Sams Club in the east coast). Understanding that their sales were beginning to decrease significantly, they began to implement a series of events where they could highlight their customer’s restaurant businesses. They called the event “Taste of the own“. These events helped establish a connection between consumers, restaurants and BJ’s. Since these events were opened to members and non-members of BJ’s, it has increased their exposure and helped them expand their services to people who may not have purchased from them previously.
Another example is what McCormick and Schmicks in Illinois are doing. They have gotten away from discounts and coupons as a way to get customers in. Instead, they have begun to use cross promotion techniques with local theaters by offering customers who dine with them an opportunity to buy a movie ticket for $5. For years restaurants and theaters have benefited from each others business. Now with this idea, both establishments can deliberately grow their customer base as well as provide their customers with a complete experience. In this example we have seen how complimentary businesses can effectively work together to increase sales and create a unique experience for the customer. At the same time, the costs of marketing and advertising are further reduced by splitting the cost between two companies.
This truly is one way to have a win-win for everyone.
In conclusion, the concepts brought out in this and the previous article can best be summarized by the words of the late management and business expert Peter Drucker:
“The customer only wants to know what the product or service will do for him/her tomorrow. All he/she is interested in are his/her own values, his/hers own wants, his/hers own reality. For this reason alone, any serious attempt to state what our business is must start with the customer, his/her realities, his/her situation, his/hers behavior, his/hers expectations, and his/hers values”
from Management: Task, Responsibilities, and Practices
Join us at the next Bay Area Mastermind Meeting, and learn how you can not only survive, but thrive in this or any economy. Check out our “Test Drive” offer you will be glad you did.