Mon 31 Aug 2009
Businesses across all industries are being forced to tighten their belts as a result of the ongoing economic recession. Cost cutting is a primary way that businesses are combating the effects of the recession; however, all cuts are not created equal. There are certain cost cutting measures that can actually have a detrimental effect on business operations in the long run.
Slashing the marketing budget. Marketing is a costly endeavor, regardless of the mediums are used. Many business owners see making cuts to the marketing budget as the best way to save money. However, the only way to generate a solid revenue stream is if customers know who you are, where you are and what you have to offer. This is accomplished through marketing, and therefore marketing is something that your business should not cut. Some businesses have actually increased their marketing budget to try and counter the effects of the recession. One good way to refine your marketing techniques is to use feedback mechanisms to see what works and what doesn't. This can be as simple as a quick online survey of customers or asking walk-in buyers where they learned about your business. This will allow you to focus your marketing monies on strategies that actually translate into results.
Refusing to accept credit cards. There was a time when cold hard cash or personal checks were the standard in business. Those days are long gone, and people are now using credit and debit cards as staples in their lives. Some business owners believe that refusing to accept credit cards is a quick way to save on costs. Processing fees for credit cards may take a percentage out of your operating budget; however, your sales will most certainly drop if you stop accepting them. You may lose sales all together or find that each sale's value has been reduced. The loss is not worth the savings in processing fees in the long run.
Cutting prices. The prices you charge for products or services are essentially the life blood of your business. When times are tough, business owners may be attempted to slash prices in order to attract more customers. This is a move that can have a negative impact in the long run. Instead of cutting prices across the boards, look for ways to give customers additional value, such as package deals, weekly specials, coupons and incentive programs.
In these tough economic times, it's important to exercise caution when trying to tighten the belt. Avoid these three cost cutting mistakes and look for other creative ways to save on overhead.