Red Zebra Business Centre - Management Memos
January 2011 Making Measurably More For Your Business Since 1985!
MaxProfile
Drought, Flood & Fire. And that's all without the Internet and the RBA!

Max Williams, Principal Consultant

Heading out into 2011 with a strong wind in the sails would be a wonderful feeling! For many small and medium enterprises (SME's), that's not the reality.  The optimism of just a month ago has evaporated.

Last year there were a number of difficulties that have been very well examined.  Put simply, business was difficult - pretty well all round.

In the third quarter of 2010, there was some considerable optimism that we had bottomed out from the GFC, and notwithstanding high unemployment and low housing activity in the US, along with the sovereign debt issue in the Eurozone, 2011 would see some strong returns to high activity - especially in the second half of the year.

Enter the Reserve Bank, along with its unwelcome interest rate rises, and waving its accustomed big stick!  From Melbourne Cup Day in 2010, confidence and retail sales levels plummeted.

It is true that the Australian Retailer's Association trumpeted that the sales post-Christmas were really strong, but they were highly promoted sales - not the regular business of trading. And the so-called  high' levels represented only very modest (read  tiny') gains over the historical data.

If all that was not bad enough, there was then the remarkable kerfuffle about GST on internet sales.

The pompous ramblings of the Prime Minister and the Assistant Treasurer on the subject showed that you should never let any politician any where near a business.  They simply have no understanding at all. 

Our readers might have been vaguely encouraged by the comments from the Assistant Treasurer that any GST action on internet sales might be provided to  'Small Business'.  Why not pick up a political free kick when it's there for the taking?

But the concept that one kind of retailer can get by with smaller margins, while other retailers need larger margins, is a fundamental failure to grasp business fundamentals.  When Government ministers simply don't understand the basics, that is a real worry!

Of course different businesses have different margins, but that's derives from the nature of the business - not the size.

Amongst all the heat (of the GST debate), those of us south of the Tropic of Capricorn had hardly noticed the rains in Tropical North Queensland. Until they affected more southerly parts of Queensland, then other states as well - notably Victoria.  And that's how we begin 2011!

Now for the Good News.  We can plan for success in 2011 - if we start now!

We have compiled the articles in this edition of Management Memos to be a montage of data and ideas published by observers across the general business spectrum, along with a little interpretation too.

These articles show that inflation will be a problem, as the result of shortages of materials and labour required to rebuild flood affected areas and assets.  The new assets produced will largely be replacements, meaning that new productive resources will not be created in the process.  These shortages will lead to demand inflation, and that will trigger Reserve Bank action to rein-in that inflation. 

Once you know that, you can plan and implement suitable responses.

It also becomes clear, when you think about it, that new business activities can add materially to the results you get - and you need those new activities.  One of our clients, having implemented a recommendation of ours about a year or so ago, is now moving well ahead of others in the same industry.

Those others thought it was not necessary, or not a good idea. Some others said it was just plain stupid!  Growth like theirs speaks for itself.  So, if you have had a good idea (or heard one) and put it to one side, get it out again, dust it off, and run with it.

The sub-text to this last anecdote is that conventional wisdom is often conventional enough.  It's just not very wise! 

So look again at some of the far-out ideas you rejected last year.

You can probably do well with them this year.  Providing you take the time to look, plan, and prepare now!








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Year of Opportunity

2011

is not going to be an easy year. But it is a year where proper assessment and planning, together with an appetite for adding new facets to your business, will pay dividends.


Look For Ways to Provide Still Greater Service.
With so much recent focus on internet sales and unfair pricing, it's worth remembering that 'Service beats bargains'.  Any time.

Every time we have done a survey, and every other survey we have studied, we have seen that price is vitally important.  Get the price wrong and you're dead! 

But price is always between second and fifth in the ranking of importance of the values sought by customers.

Almost always, service outranks price in the ratings.

There is however, a trick. You have to offer a service the customer really values.

Some business people, fir example, list their ready availability if things go wrong as a 'service' a customer should pay for.  In some cases that will be important, and in other cases not so.

Examine carefully your sales proposition to see if your service support is valuable in your customers' eyes. Or whether it's just your view they should value it!

Australian consumers are the world's "biggest bargain hunters" according to research by NCR Corporation. Sixty nine per cent of Australian respondents admitted to switching retailers or banks to get the best deals, better prices or more loyalty rewards - the highest of all countries surveyed.

But while price is important, the vast number of respondents (87 per cent) said they would stay loyal to a brand if it gives them more personalised interaction and control.

NCR's survey shows that while the global financial crisis has made consumers keener to shop around for a better deal, they still value individual, personalised service across all channels. Australians are increasingly expecting service choice, to have their preferences understood by companies and to be able to decide where and how they interact with them.

So the way forward in 2011 is clear. Identify the services that are important and add these new service elements.  You'll be surprised at the results.
(Note: 'are important' - not 'ought to be important'!)


Service


9 Areas to Get Creative!

The aftershock of the global economic crisis has triggered the amazing adaptability customers have, to create a new way of life.  Here are nine trends predicted to be  key drivers for the year ahead.


1. Security is Real Value

With a heightened sense of what economic collapse looks like thanks to the global recession, a renewed emphasis on disaster prevention is driving buyers to think defensively.

In the UK, 43 per cent of consumers say "trying to add to my rainy day savings/emergency fund" is a priority for this year, up 15 per cent from last year. In the US, a third of consumers say they're using debit cards rather than credit cards. Debit transactions are forecast to rise nearly 60 per cent between 2000 and 2010. .

2011 may see an opportunity for you to enhance a product or service to deliver more long term benefits, reduce risk, or prevent a problem.

2. Here Comes the 'New Retail'

With online experiences developing rapidly, bricks-and-mortar retailers are seeing that discounting in the battle against the internet is a short-term, and interim solution.

Depending on where you look, you can see growth in on-line sales in Australia something more than 10% in 20101.In the UK, 47% of consumers said they only buy clothes on a sale offer or with a promotion, while. 35% in both the UK and the US said their choice of store is determined by special offers or discounts.

Commercial purchases are harder to measure, but anecdotal evidence suggests that similar behaviour is affecting commercial purchases too.

In 2011, you will need to get more creative to lure any kind of buyer to buy from you.
9 Areas to Get Creative! (cont'd)

3. Significant Changes for Women

More women are earning and learning more than men, creating new gender roles in business, and the retail market place. Age is no longer an easy marker for life stage. Opportunities are there for businesses to focus less on the year the female buyer was born, and more on where she is in her life is right now. So, 2011 may see a counter trend to the 'metrosexuality' of men, in the form of a 'masculinization' of women.

Implications for how businesses market to women will be big.

Woman

4. The Future's Mobile

With smartphones now a driving mobile force, Quick Response (QR) codes and creating new 'apps' will provide colossal opportunities to create unique experiences.

In 2011, more and more of our buyers are carrying the mobile computing equivalent of the 'Colt 45'. Smartphone equipped buyers have real buying fire-power, and they can search like never before!.

Rather than displacing physical purchasing, this technology has the potential to reinvigorate buyers' relationships with our businesses.

5. Skill Shortages Worsen

Economic uncertainty has changed the workplace and the meaning of job security for the foreseeable future. Meanwhile, the recent decimation of large swathes of Australia's infrastructure and housing in widespread floods places intense demands on the available labour force. Upskilling staff will be a priority - and an opportunity

I2011 is likely to see more emphasis on companies investing in employees through education and training, rather than salary or benefits. Meanwhile learning while doing, may become a focus with DIY education gaining momentum. 

There's an opportunity for businesses to play a part.

6. 'Boomers' Change Retirement Plans

2010 was the start of the age wave hitting Australia. This ageing population affects everything from the national accounts, to demands on health and housing, to the workforce.

In 2011, this group may prove an untapped market for advertisers, affecting a number of consumer sectors

7. How Big?

Our attitude toward weight is polarizing, pitting the rise of the super-healthy against the eternal appeal of indulgence.

The Australian Government is currently planning the implementation of an ongoing data collection to measure nutrition, physical activity, physical measurement and chronic disease risk factor data. The first survey will be undertaken in March 2011.

So 2011 will present a wider opportunity for products and services catering to an obese market.

8. Growing Emphasis on 'Fresh'

Take a look in any city. Notice the proliferation of 'compact, city dwellings'. Modern compact, city dwellers have a growing need for nature. In the UK, 1 in 5 consumers grow their own fruit & vegetables, and in the US, 40 per cent of people with a garden agree "growing fresh food to cook with" is important.

For Australia, food prices will rise as a result of massive climatic damage to crops and feed lots. 'Fresh and healthy' is taking on a new meaning.

In 2011, rising food and commodity prices will drive an increase in seed and gardening sales, as this trend develops.

9. We Need to be Needed

More and more things are being 'digitized', and automation technology has machines replacing people. While cashier-less checkouts are becoming common place, we're seeing machines creep into new territories.

We will see more jobs permanently displaced by technology, and that involves service jobs, not just manual or factory work.

In 2011 the backlash creates an increased cachet for hyper-personal goods and services




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