The economic and health impacts of the coronavirus pandemic have disrupted markets worldwide and increased uncertainty and unemployment, but some businesses have found ways to succeed in this uncharted territory.
Some switched production to meet current demand for personal protective equipment, and others catered to increased demand for online delivery of groceries. As the pandemic progresses, new options emerge.
Consumer purchases and demand for goods and services started to rise when economies began reopening, helping to improve market conditions and reshape businesses’ activities.
For example, pharmaceutical companies are boosted by their quest for coronavirus vaccines and consultations; technology giants are buoyed by facilitating tech advancements and office employees’ working from home; and retailers began offering lockdown necessities online.
5 tactics for surviving the pandemic
To improve their chances of making it through the pandemic successfully, businesses should heed the following insights:
Customer retention is better than acquisition. Retaining existing customers is much cheaper than acquiring new ones. It’s challenging to meet customers’ preferences in this pandemic, but it’s an opportunity to show your business can fulfil them.
It’s crucial for businesses to adopt e-commerce platforms, maintain social distancing through contactless delivery systems, and connect with customers remotely to understand their concerns. Stepping up the focus on customers may add costs and set margins under pressure, but it will also enhance customer loyalty.
Further, businesses may want to revisit their warranties, guarantees, and return policies to increase business with customers that are nervous and postponing purchases. Hyundai, for example, has a six-month payment relief programme for those who lose their jobs because of the coronavirus through the end of this year. Ford also announced a payment relief programme for US buyers in March, and many other carmakers have offered opportunities to defer payments as well.
Bundling products and services. It’s time to consider what other products and services may fit in the portfolio to nurture or diversify the business model. This will enable businesses to use their trained staff, operational facilities, and distribution channels efficiently while meeting consumer demands at lower costs.
The concept of bundling products and services has been successfully implemented by leading companies such as tech giant IBM and auto supplier Magna International, which offers complete vehicle assembly services to automakers. In the Middle East, local delivery companies Talabat and Rafeeq have started to source groceries and medical items along with traditional food delivery.
Product and service bundling has been viewed as a strategic marketing opportunity to attract ‘’super-consumers’’ while adding value. Many businesses may adopt a risk-averse strategy towards innovation, but consumer behaviour is changing. Accelerating the level of innovation will improve the products and services offered and will be appealing to consumers.
Pandemic-prepared business model. It’s vital to focus on customers, to better understand their needs in this pandemic, and to reimagine and change the business model accordingly. Businesses should examine the supply chain, look at products with safer, contactless delivery systems, and enforce a pandemic-prepared business model. Products with safer design considerations, such as virtual remote controls for hotels that enable guests to use their smartphones to change the channel, also will be appreciated by customers.
Reframing your business model overnight is not going to be easy, but it’s necessary to pursue new opportunities. Online portals, e-marketing, and branding can boost a business’s online presence and attract customers. Businesses should understand that certain sectors, especially online shopping, online education and tutoring, online payment gateways, online entertainment, online pharmaceuticals, online health and consultation services, etc., are likely to prosper in a pandemic. Amazon, Microsoft, PayPal, Netflix, and Zoom are companies that have already benefited.
As the crisis is unfolding, certain industries will regain their earnings and will be eager to serve customers. Major airlines that have grounded their fleets and suspended most of their flights may have to take severe precautionary measures before onboarding passengers again. Airports should safeguard the health and safety of anxious passengers by facilitating additional health-screening facilities, washrooms, cleaning facilities, and availability of self-check-in booths. Meanwhile, airlines can embrace technical advancements such as facial recognition to ease processes such as bag drop, border control, and security clearance, and to avoid physical contacts while social distancing.
Optimise costs and benefits. Businesses should revisit their budgeted costs and right-size them to better suit pandemic conditions. Some investments may not have expected results. For example, large, budgeted marketing costs may have to be cut. Also, as many exhibitions and events are halted or move to virtual presentation across many regions, sponsorship fees and banner and advertisement costs could be evaluated to determine how to best leverage them in a virtual environment while companies save on the travel expenses required for in-person attendance.
Independent business reviews may show areas in which existing vendors are flexible and costs can be trimmed. Also, any budgeted business development costs, such as business trips, market development costs, and discretionary expenses, can be trimmed. Delayed hiring, reduction of overtime, nonvoluntary unpaid leave, a partial waiver of salaries, deferral of accounts payable, inventory optimisation, and withholding dividends are some measures that can improve cash flows in the short term.
While investment in IT platforms may provide benefits for many organisations, an assessment of IT costs may identify low-hanging fruit for cuts, such as eliminating platform-as-a-service arrangements, switching to cheaper alternatives, deprovisioning unused storage, and optimising usage of cloud-based applications.
Short-term acute forecasting. Short-term projections enable organisations to weather the storm and emerge stronger. Attention to drastic shifts in consumer behaviours such as prioritisation of product categories, purchasing channels, brand identity, quantity demanded, product switching, etc., are critical to get your short-term forecasting right. Heed multiple sources and adopt an iterative, pragmatic approach to understand variables better. This requires a new type of planning that lasts not more than a period of six to eight weeks considering the current level of uncertainty and the size and scope of the business.
As economies begin to reopen, many businesses may focus on the emerging new business opportunities and overlook the bigger picture. For instance, seizing on fast-moving goods to secure short-term revenues may lead to missing a new revenue or pricing model for the existing product portfolio. Moving away from a traditional transaction-based model towards subscriptions or even gift cards may develop a new source of revenue in the long run.
This pandemic has changed our behaviours and the way we perceive things while we are confronting a new world. New habits may create new opportunities for businesses to face the storm and be resilient while adding value to their equity.
— Faiz Sherifdeen, ACMA, CGMA, ACCA, is a senior accountant with the Qatar Development Bank. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.