Tuesday, November 1, 2011

Business Strategy Accounts For Change

Nothing is so permanent as change. The customer you deal with today will not be the same one you see tomorrow. Your employees will have a different outlook on work when they get up in the morning and your vendors will come through the door with new products, new prices, and oh, by the way, new corporate owners with new credit requirements. More of your tools will have LCD screens and many of them will talk wirelessly to your customer and to each other. You can only hope they keep talking to you. In every type of business—change happens.

Some of us fight change and some of us embrace it, but we all have to deal with it. “You have to respond to the market,” says Michael Young, owner of Street Rods by Michael in Shelbyville, Tennessee. “If you can’t adapt, you’re not going to be here in five years.”

Consider your customers. Most company owners are justifiably very proud of having a base of loyal customers. If they rely exclusively on those loyal customers to support their revenue stream, though, it won’t be long before they see their sales decline. Why? Because customers change. Consider just one simple fact: twenty percent of Americans move every year. While not every one of them moves across the country and therefore out of your market area, many do. And even those that just move across the street put a dent in their disposable income with moving expenses, etc., that cut into their budget for other things—like what you sell. Those lost sales have to be replaced by sales to new customers just to stay even.

Even the customers who do stick around change. Their tastes evolve, they learn new things, they get bored and want to do or own something different. If nothing else, they get older. The baby boomers, the generation that gave us the Rat Fink and American Graffiti, has started cashing Social Security checks. How will that change their propensity to spend money on hot tubs, designer denims, or flat screen TVs? And will the younger customers who hopefully come along to replace them be looking for the same things? Not likely. That’s one reason you see more muscle cars on the street and fewer ‘34 Fords; more Hondas and fewer Chevrolets. It’s not just a change in fashion—it’s a change in the customer.

Don’t fight it

So how do you deal with change? To start with, don’t fight it—you can’t win. Instead, open your eyes to the inevitability of change, make yourself and your company ready for it, and embrace it when it comes. The first step, if you want to keep up with changes in the marketplace, is to make a conscious effort to listen to what the customers are saying to you about themselves and what they want.

“Customers are more knowledgeable,” observes Sales Manager Tom Dickinson of AP Tuning in Lebanon, PA, a company that specializes in high-performance automotive work. Not too many years ago, hot rod magazines and mail-order catalogs defined media for that market. Today, enthusiasts can learn about the sport from an ever-growing number of media outlets—everything from the Internet to entire television networks devoted to it. Enter a term like “torque converter” into Google, and you’ll get 743,000 listings. When Dickinson’s customers see somebody on TV winning races or shows with a car like theirs, they become a more informed—and generally more demanding—customer.

“It used to be that you learned about cars by talking to the guy in the next pit stall at the track,” according to Darrick Klima, also in the automotive performance business as owner of Belleville Motorsports in Belleville, KS, where they build over 100 race cars a year. “One of the bigger things these days are race car workshops and driving schools. People are spending money to become better racers because they’re spending more money on better race cars. It puts a lot of pressure on everybody.” Klima attends schools and seminars himself so he will know what his customers are being told.

Klima also spends a lot of time getting feedback from customers. “We meet change by listening to our customers,” he says. “All I do all day is talk to people who are racing our cars.” He says he and his staff listen to the drivers’ ideas, bounce them around internally, then try them out to see if they work. If they do, the new concepts become incorporated into all their products. “We have to definitely spend more time and money trying to come up with a better mousetrap.”

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.

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