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Andrew J. Policano
Dean, The Paul Merage School of Business
UC Irvine
The
best advice for the small business owner doesn’t really vary throughout
the business cycle; whether during expansion or recession, the customer
is always the driving force of your business.
To be
successful, have one overriding goal: Listen carefully to your
customers and understand their needs. This means being able to react to
their expressed needs and understand them so well that you can
anticipate the needs that they have been unable to articulate. Then
strategically act on this information to provide a product or service
that is so compelling, it allows you to establish a strong competitive
advantage that is difficult for others to overcome.
The
challenging part of that strategy is that the needs and perceptions of
customers can change rapidly, especially when macroeconomic
fluctuations cause unexpected and significant changes in their
income. During the first part of the last decade, the booming economy
gave consumers a boost of overconfidence, driving a period of exuberant
borrowing and spending. Businesses reacted happily to the resulting
demand for prestige products that provided pricing premiums for brand
recognition.
Today’s environment is quite the opposite.
Consumers are focused on price, value and savings, increasingly drawn
to generic or “house” brands rather than to prestige brands. Many
retailers have already been hit hard by their customers’ reluctance to
pay a premium for brand recognition. As a result, they have made major
adjustments in reaction to evolving customer preferences. For example,
clothing companies like Saks, J. Crew and
Abercrombie & Fitch
have lowered prices, and many clothing companies have shifted their
lines to more popular styles at more palatable price points.
The
growing preference for generic brands is reflected in a recent estimate
from the American Research Group, which reported that this year,
“house” brands will account for 37.5 percent of all sales, compared
with 26 percent a year ago. Given customers’ focus on value, the small
business owner should market products and services with this
orientation in mind. The best combination would be low price with high
value and prestige. While this goal is hard to achieve, it would
certainly establish a strong competitive position.
Andrew J. Policano | Anil Puri | Esmael Adibi
Abe Helou | Linda A. Livingstone | Timothy Peters
Ahmad Hosseini | James G. Ellis
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Andrew J. PolicanoDean, The Paul Merage School of Business
UC Irvine
The best advice for the small business owner doesn’t really vary throughout the business cycle; whether during expansion or recession, the customer is always the driving force of your business.
To be successful, have one overriding goal: Listen carefully to your customers and understand their needs. This means being able to react to their expressed needs and understand them so well that you can anticipate the needs that they have been unable to articulate. Then strategically act on this information to provide a product or service that is so compelling, it allows you to establish a strong competitive advantage that is difficult for others to overcome.
The challenging part of that strategy is that the needs and perceptions of customers can change rapidly, especially when macroeconomic fluctuations cause unexpected and significant changes in their income. During the first part of the last decade, the booming economy gave consumers a boost of overconfidence, driving a period of exuberant borrowing and spending. Businesses reacted happily to the resulting demand for prestige products that provided pricing premiums for brand recognition.
Today’s environment is quite the opposite. Consumers are focused on price, value and savings, increasingly drawn to generic or “house” brands rather than to prestige brands. Many retailers have already been hit hard by their customers’ reluctance to pay a premium for brand recognition. As a result, they have made major adjustments in reaction to evolving customer preferences. For example, clothing companies like Saks, J. Crew and
Abercrombie & Fitch have lowered prices, and many clothing companies have shifted their lines to more popular styles at more palatable price points.
The growing preference for generic brands is reflected in a recent estimate from the American Research Group, which reported that this year, “house” brands will account for 37.5 percent of all sales, compared with 26 percent a year ago. Given customers’ focus on value, the small business owner should market products and services with this orientation in mind. The best combination would be low price with high value and prestige. While this goal is hard to achieve, it would certainly establish a strong competitive position.
Andrew J. Policano | Anil Puri | Esmael Adibi
Abe Helou | Linda A. Livingstone | Timothy Peters
Ahmad Hosseini | James G. Ellis
BACK TO MAIN PAGE
Abe Helou | Linda A. Livingstone | Timothy Peters
Ahmad Hosseini | James G. Ellis
BACK TO MAIN PAGE
