In today’s post, we bring you the conclusion of our series on how to combat COVID-19 (Read the previous post). In your post-pandemic bid to build your brand, you’re likely to encounter price under-cutters and high costs. You’ll need to accommodate a more mobile workforce, and you’ll need to maintain and build your customer loyalty. Today, you’ll learn how to accomplish these worthy goals with proven, no-nonsense strategies you can put to work right now and deal with low cost competitors.
Let’s get started.
How to Counter New Low-Cost Rivals
When it comes to negotiating a new competitive landscape, one truism holds out. You’ll inevitably find yourself facing new low-cost rivals. These outfits seem to spring up out of nowhere, with their low, low prices. You wonder how you can possibly compete if you can’t meet them at their level. You spend valuable hours—hours you’ll never get back—pouring over your next move. Like a chess player against a careless, aggressive opponent, you study the board. You wonder what they could possibly be thinking.
Instead of whiling away time worrying about why think about how. How did this come about? If you’re in an industry that was hit hard by COVID, then that’s your answer. It’s likely that the new company has serious financial backing, and they’re looking to disrupt a rocked market.
Their plan: undercut you at every turn.
Okay. Take a breath.
You’re participating in a free market. Undercutting you is their prerogative. You can’t control their business strategy. All you can control is…well, you.
That becomes your power.
You can control how you react to their goads—and goads they are. A sale here, a special discount code there. You may even notice that your new competitor waits for you to announce a sale before announcing one of their own. Sure enough, their prices are lower.
But what do you have that they don’t?
Time in the market. How is your brand? Have you stockpiled brand loyalty? Do you have an active social presence? Loyal, engaged customers? Look at your assets, and don’t over-focus on theirs.
Here’s something you can do right now, this minute, to calm down: be grateful.
That may seem trite, or cute, but that’s not my intention here. Other companies entering your market is not a bad thing. In all likelihood, it indicates that your market is healthy.
It means that there’s market share to be earned.
Think of it this way, Coca-Cola is always in a duel with Pepsi. Both of these brands have immense staying power. When a new entity enters their market, they look up, nod at the newcomer, and go back to their eternal struggle.
Here are a few other companies in the same boat. You can study their case studies, history, and marketing strategies to get an edge:
• Philips and Matsushita
• Avis and Hertz
• Caterpillar and Komatsu
• Procter & Gamble and Unilever
• McDonald’s and Burger King
• Nike and Adidas
• Adobe and Autodesk
Pay particular attention to how these companies react when new competitors enter the fray.
Don’t worry, we’ve prepared a cheat sheet for you below.
However, these behemoths are sometimes guilty of blindness to emerging threats. Thus, Nike lost market share to Under Armour. McDonald’s and Burger King both lost market share to Wendy’s. All fast food is losing market share to higher-end faster casual eateries.
What’s the pattern? How do these new businesses, seemingly coming from nowhere, thrive when these giants exist and dominate?
The answer is simple. They often come into the fray with new business models.
Consider the low-cost wave of the ‘60s to 90s. We saw newcomers such as:
• Southwest Airlines
These companies are now under threat from companies like:
This is the way of things.
So ask yourself: does your new competitor have a drastically different business model?
You may need to do some sleuthing to find out.
But if their internals is similar to your own, and they’re undercutting you on price, they may be lighting a short fuse.
If, however, they are operating under a different model, then take notice. What can you learn from their operation? Is there anything you can adopt from their apparent business plan, operating procedures, or architecture?
Let’s say you’re a SaaS, software-as-a-service. Your customers are other established businesses. Let’s say you charge by the year. Your new competitor, who is targeting the same enterprise customers, charges by the month and undercuts you. To your surprise, customers seem to be taking the bait. Well, you have a brand presence that your new competitor does not. You have some customer loyalty built-in. The answer here maybe, if possible, to add more flexibility to your payment scheme. After all, the new competitor’s initial customers may be responding to the novelty of more flexible payment options.
Offer the same and take the competitor’s edge away.
Since you’re the established party, it may be worthwhile to take a bit of a loss in the short term to do this.
Here’s a startling fact for you: in a race to the bottom, newcomers always have an advantage. What, then is the long-term solution? Differentiation.
The go-to strategy for dealing with a new competitor who is undercutting is to differentiate your offering. This accomplishes three things:
• You stand out more strongly to your target audience. Coupled with your established brand loyalty, this can keep sales coming in. Better yet, you won’t have to lower your prices to unsustainable levels. This strategy allows you to stand pat while your new competitor burns through their seed money. Other than the costs of R&D, rolling out a new product, and marketing, you keep your powder dry.
• You project confidence and an innovative spirit. Stand firm and watch your competitors get nervous. Then watch nervousness turn into fear. Instead of automatically matching their prices, you’re busy offering new products. What’s more, you’re offering specials and sales strategically, not out of panic. Even better, the longer you stand firm and retain market share, the lower the newcomer will have to lower their own prices. After all, this is their entire strategy to cut you out. Or else they’ll swerve, which they never intended to do. Either way, you win.
• You take full advantage of your established infrastructure. Can this new competitor innovate as fast as you can? Probably not. At least not safely. Take advantage of this.
Of course, unless you’re Google, you should be somewhat conservative in your approach. Consider carefully which new products or services to develop and introduce.
Focus on new products that:
• Offer true value to the customer
• Help the customer solve a new problem
• Address pain points that your new competitor has neglected
• Can be expanded upon or improved upon should they prove successful
• Allow you access to a different, but related, customer base
Of course, your new product need not tick all these boxes. But a few at a time is a good bet.
So what does this look like in practice?
Let’s look at a few classic examples:
• The “cool” product or gadget creator. Apple, IBM, Uber, Google, Bang & Olufsen.
• The innovator. Gillette, Tesla, and Dollar Shave Club
• The diverse product mix provider. Whole Foods, Sharper Image, and Amazon
• The community builder. Starbucks, Harley-Davidson, and any company that caters to vegans
• The problem solver. Dropbox, Adobe, IBM, and 3M
These business models are time-proven. But you’ll probably want to avoid mixing and matching them. Instead, decide which profile you resemble the most.
Then seek to innovate within that core framework.
See the following case studies for examples of companies shifting their competitive strategy in response to COVID.
Lower Your Costs
While you put the new competitor in their place, it’s a good idea to slash your own expenditures. In this section, we cover some no-nonsense cost-cutting strategies.
The first thing you want to do is take a cold, hard look at your current strategy. Determine whether you’re in a position to make large, sweeping changes to your overall business. The more influence you have over your product and your marketing, the more room for improvement you have.
After all, you’re at the helm.
The buck stops with you.
So roll up your sleeves and prepare to devote a few hours to cost analysis.
The first step in analyzing your expenses is to categorize your spending. Major cost centers indirectly contribute to revenue. But, of course, they have their own ongoing costs. It’s up to you to make sure those costs stay reasonable and don’t grow. If they do grow, this growth must be justified.
An example of a major cost center: your customer service department.
Customer service indirectly contributes to revenue in the following ways:
• Increases customer retention
• Builds customer trust, which can encourage them to spend more in future
• Prevents bad reviews online
But customer service has the following costs:
• Dedicated staff & training
• Dedicated equipment & software
So to justify these costs, your customer service department must result in higher retention, better customer loyalty, and a reduction in bad reviews. All three of these benefits manifest as higher revenue.
Examine all of your major cost centers one by one for leaks.
The other major cost centers are:
Can you make cost reductions in these departments without compromising their respective missions?
Slash Admin Costs
The admin of most companies is bloated. Reducing admin costs, over time, will help you remain agile. However, with this particular cost center, your best bet is to make small changes over time. Unpredictable and sweeping changes here will lower employee morale. But small changes will add up and will result in significantly lowered costs.
Below are proven ways to cut admin costs over time. These can be a great response to COVID and will help you remain agile.
• Rent instead of buy
• Limit travel
• Telecommute and encourage staff to do the same
• Refinance existing debt
• Sublease excess office space
• Slash recurring expenses like software subscriptions
•Eliminate paper where possible
• Carefully monitor office supplies
Focus on Financials
Post-COVID, it will be important to maintain focus on core business functions. While you watch the market shift and morph in response to the pandemic coming to a close, focus on your financials. This requires a proactive approach. You’ll need to keep tabs on:
• Deals with suppliers. Is it time to renegotiate? Are your suppliers in a position to dictate terms, or do they now need you more than you need them? Compare your situation now to before COVID struck. You may be surprised to find some leverage you didn’t have before.
• Cash flow forecasts. Have you become complacent? Are you running monthly cash flow forecasts or have you slipped to quarterly? In times of crisis and immediately thereafter, monthly forecasts are recommended. Cash flow forecasting is vital.
• Advanced planning. How is your position in the market post COVID? Did your brand and image come out unscathed? Think back on your COVID experience so far. If another pandemic struck, how would you react differently than you did the first time? Go ahead and codify this into an advanced plan. Even if we avoid another pandemic, the exercise will do you good.
See the following cost-cutting case studies for further study.
Embrace Remote Work
If there’s one thing COVID taught us all, it’s that we might be required to support remote workers at any time. Today’s telecommunication tools are quite robust. If it’s been a while since you last appraised the state of the art, take a look:
• Webinars. Webinars allow you to communicate with hundreds of employees at once. Some platforms allow you to categorize your employees into groups so you can easily communicate with one department at a time. The webinar is an incredibly efficient way to convey vital information to many people at once. You can even share documents with everyone at the same time.
• Video conferencing. Skype, Zoom, and similar services have come a long way. Skype, for instance, now offers end-to-end encryption and higher quality video than ever.
• Project management. There are some truly staggering project management tools out there these days. Trello and similar products allow you to manage entire projects on movable boards. You can assign a team member to any task and can see the status of that task at any time. These products are secure, fast, and always on.
When transitioning your workforce to more of a telecommunication setup, there a few steps you need to take. Following these steps will ensure that your employees feel safe, secure, and cared for. This will, in turn, keep employee morale high.
#1 Build Trust & Embrace Flexibility
The best way to build trust is to give trust. Allowing your employees to telecommute means that you must offer greater autonomy. It means that you trust team leaders to keep people motivated over great distances. Plus, it means that you increase transparency across the board. The good news: trust-building becomes automatic provided you actually do these things.
If your employees trust you to trust them, they’ll be more upfront with you when they’re going to miss deadlines. After all, they’re working from home now. There are bound to be distractions. Sometimes, these will be legitimately unavoidable distractions.
Consequently, you may need to work on building some flexibility into your processes. One way to do this is to become more agile by embracing Kanban and similar frameworks.
Remember: leadership isn’t just about checking that deadlines were met. It’s about building an environment in which employees want to meet those deadlines of their own accord.
The most effective leaders stoke the passions of employees rather than stirring their fears.
#2 Optimize Your Processes
Optimizing your processes often comes down to providing the right tools. Allowing your teams to go remote probably means investing in some heavy-duty software.
In addition to video conferencing software like Zoom, you will need:
• Document sharing and signing software like Adobe Sign
• Online document creation and sharing software like Google Docs or Dropbox Paper
• Real-time communication software like Telegram, Slack or Flock
Skimping on any of these areas will bring your productivity to a halt, and it will drag employee morale down.
The good news is that many of these services offer money-saving yearly subscriptions. Some of them even have free alternatives that are serviceable while you get things up and running. Google Docs, for instance, is a robust, free solution.
#3 Hold More Meetings Than You Think You Need
Especially early on in the transition process, you should err on the side of caution. Hold more meetings than you think you need. This will provide employees with a gentle reminder that you’re still in charge and that they still have deadlines they must meet. But we’ll tell you this up front: holding so many meetings will get old. You may be tempted to drop them after a few days or weeks, but don’t. Your vigilance will pay off.
There is a phenomenon whereby complacency tends to creep in once employees are transitioned to a remote setup. This is a natural and almost universal process, and it tends to lessen in severity with time. But you can limit its impact by…you guessed it, holding frequent meetings.
So get used to staring into small windows featuring little talking heads.
See the following case studies and resources for more on this complex topic.
Maintain Customer Loyalty
Finally, let’s look at how you can maintain your customer loyalty through the COVID crisis and beyond. After all, maintaining and growing customer loyalty is an integral part of building brand awareness and loyalty. Many business owners want to jump straight to building customer loyalty.
But that assumes that your brand-building ship doesn’t have any leaks, doesn’t it?
Don’t go straight to building loyalty. Instead, put your focus on maintaining what you’ve already built. Especially if you’re coming out of a crisis.
The first step to maintaining brand loyalty is to be true to your stated purpose. Review your mission statement and any other core materials that define you as a company. Are you holding true to those ideals?
If so, how are you demonstrating this to customers?
During times of crisis, every interaction with customers is vital. Every touchpoint is the crucible through which your brand is made stronger. It’s an opportunity to demonstrate why you stand head and shoulders above the competition.
Right now, and perhaps more than ever, customers are paying attention to how companies conduct themselves.
Companies who navigate the COVID-19 crisis with integrity can come out well ahead of others.
Why? Several reasons:
• Customers, especially younger consumers, talk to each other about companies that share their values.
• Consumers are looking for fair deals more than ever amid concerns of possible economic collapse
• Consumers are actively shaming companies that seek to exploit the situation
If you’re doing something as progressive as, say, creating a new sick leave policy that encourages sick employees to stay home, don’t be shy about it. Many business owners get this wrong. They fear that customers don’t want to hear about their inner workings. Or else they fear customers will think they’re trying to be slick, sly, or self-serving. Bah. Right now, customers are seeking assurances that companies large and small are willing to do their part to lend a helping hand. If you’re doing your part, don’t be shy about it.
This leads to the major point…be in contact with your customers. Don’t leave them in the dark. Use your social media profiles to share the good news.
But know your platforms-and if you don’t, ask a peer or hire a consultant.
• Twitter. Good for sharing small bits of news.
• Facebook. Good for sharing live streams or longer news stories
• Instagram. Good for sharing photos of your inner workings and staff
• Pinterest. Good for sharing images of your product or service, but get creative with it
Finally, invest in proactive customer loyalty initiatives and programs. Do all you can right now to increase customer engagement. Doing so makes it more likely that your customers will form a long-term relationship with your brand.
A few tried-and-true customer engagement initiatives are:
• Content marketing to increase engagement or get leads into your funnel
• Email marketing campaigns
• Phone follow-ups where appropriate
• Social media marketing
• In-product messaging
As if often the case, these methods are best used in conjunction with each other and over time. But if you’re only doing a few of the above, there’s no time to expand your outreach efforts like the present.
See the following case studies and resources for more on customer loyalty.
I hope this two-part series has given you solid insights into how to come out of COVID with a stronger brand than ever. If you found these posts valuable, could you do us a favor? Please share this post on social media. Someone else might find it equally valuable. Thanks!