After many years of boom and prosperity in the oil industry for encompassing stakeholders, the outgoing year has seen the biggest downfall in price of crude oil perhaps since the sharp downturn in the 90’s. From a standard average price of USD 100/barrel, prices have slumped to as low as USD 26/barrel and now gradually recovering at USD 40 – 50 per barrel. The implication of this sharp downturn on predominantly oil exporting countries like Nigeria is the need to drive cost leadership by major stakeholders in the oil industry and on a larger outlook, the need for government to cut down on spending and expenditure to make room for the shortfall in oil earnings. And as can be seen with most oil exporting countries, the cut in spending has slowed down their economy and as a result led to record cases of job cuts, high inflation and low purchasing power amongst consumers.
With struggling economies and limited sign of growth or recovery – businesses in the product and service sector (multinationals and SME’s inclusive) have been on the receiving end of the downturn seeing that patronage from consumers and profitability has dropped with buyers wanting to pay the lowest price for the best quality of service or product out there. Drilling down, we are constantly witnessing cases of businesses fighting for the same share of wallet, indicating that competition is at its all-time high!
With little or no indications that oil prices are going to reach peak levels anytime soon and considering the fact that the diversification drive for the Nigerian economy would not happen overnight, new and existing businesses must adopt a more proactive approach especially with the declining economic outlook and increasing competitive landscape.
In a time where the profitability of most businesses has taken a huge beating with consumers unwilling and unable to pay more for value due to shrinking disposable income, it is now paramount for businesses to deliberately strive to keep and maintain their market share while profitability continues takes a momentary back seat. Business focus/strategy should be aligned mainly on maintaining and holding tight to your market share as opposed to the norm of growing profit and meeting shareholders expectations.
Key questions to ask and consider:
• How can I improve customer service and product delivery?
• How do I keep my customers engaged and committed?
• How can I offer my customers the best service/product at the most competitive price?
• How can I drive cost leadership and excellent service delivery without comprising quality?
While this is not a call for businesses to transact at a loss, the plea and proposal is to keep your market share and ensure you are positioned to defend your territory. Achieving this puts your business in a good position to grow profitability as soon as the economy starts showing signs of improvement and growth. Worthy of note is that any market share lost to competition now might take a lot more to re-gain when the economy begins to show sign of recovery. So, keep your customers close!
Improve support and patronage from your existing customers. It is important to be positioned to grow support from your existing client base.
Some key questions to ask and consider:
• Which other products or services would add value to my existing customers?
• What actually do my existing customers want, any other needs I could be solving?
• Do I really understand my customer, industry and market dynamics? If yes, how can I grow traction and achieve bigger share of my customer’s wallet?
Following the next two approaches should be how to find new customers and improve your current client base. Some key questions to ask and consider:
• Which customer segment am I missing out on, which new customers would find my product/service appealing and be willing to pay for it?
• Which new markets can I conquer, how can I scale into such markets?
In torrid times that we are now, safeguarding existing market share and growing your share of wallet with existing customers should take priority. Only after this is successfully achieved and tracked should new customer acquisition strategies take centre stage.
Photo Credit: Hongqi Zhang (aka Michael Zhang) | Dreamstime.com