Is it time to share the pain?

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Martin Hayward, Founder of HAYWARD Strategy and Futures discusses consumerism.

When times are good in consumer markets, it’s easy to get away with being both the consumer’s and the city’s friend….and times were good for a long, long time…so we’ve got used to the schizophrenic nature of corporate reports.  It was possible to boast of significant growth in revenue and profitability on the one hand, but also to use offers and promotions to assure the consumer that they were getting a good deal too.

But it’s different now, and the foreseeable future for the UK consumer is one of great pressure as wages fail to keep pace with inflation, unemployment remains high and economic growth remains muted as the deficit is repaired. As the CEO of the Co-op said  today: “I’m normally an optimist but I can’t find anything to be optimistic about when I think about the economy. When you look at the fundamentals, you have house prices falling in value, people’s jobs are under threat and inflation is eating into real incomes.”

Despite this intense pressure on consumer expenditure, the city will continue to exert equally enormous pressure on CEO’s to maintain profit, if not revenue growth. This leads to a conundrum that many of these CEO’s have never had to face. If the consumer has less money to spend, to maintain profitability a company has to widen margins. But increasing margins at a time of less disposable income and high inflation is hard, and potentially counter-productive as customers will surely feel less than thrilled if increased profit results are proudly announced to the city.

What I don’t yet see are CEO’s explaining this conundrum to the city. Accepting the reality of squeezed consumer spending, maybe the best long-term strategy is to side temporarily with customers and really earn their long-term loyalty. We all talk of customer centricity, but there’s never been a better time to put your money where your mouth is. If profits are subdued, but the customer knows that a business has taken a hit to help them through the hard times, it will earn significantly more loyalty than a few headline promotions could ever achieve. The pay-back in future years could easily dwarf the ephemeral short-fall. Loyalty is a long term game, and now is the time to demonstrate that it’s a company’s loyalty to its customers that really drives results.

At times like this, I’m just not sure that both the city and the customer can be winners. It’s not easy, but I know who I’d really focus on keeping happy for the long-term success of my business.

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Posted: August 26th, 2011 | Author: stuart.treasure | Filed under: Customer Champions | Tags: , , , | Leave a Comment »

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