Cost cutting has been a key response of most companies to the economic crisis – with revenue growth flat or, in many cases declining, there hasn’t been much choice.
By and large, clients say that they were able to cut costs effectively through the crisis, but are far less confident of their ability to continue such cuts or to contain future increases. Also, unlike previous recessions, in which companies implemented temporary cost reductions for six to twelve months, followed by a return to business as usual, current cost reductions appear to be long term, perhaps permanent, as companies anticipate lower economic growth rates for the foreseeable future.
Organisations now need to take a more strategic view and focus on rebuilding and further improving margins in a sustained manner.
Margin improvement presents difficult challenges both in relation to ‘right sizing’ the cost base and the implementation of pricing.
Cost is not merely about ‘reducing costs’, it is about determining what is your most appropriate cost base when thought of as an investment? Price is about moving the dialogue by adding a new dimension to traditional pricing strategies, that of value. Does your customer understand the value you provide or are you the same as the competition? You can dictate this by differentiating your customers according to the value they need. Move away from volume and price discussions to what does the customer values the most and deliver that.
Together, these powerful levers can help your business achieve higher margins. Call Gatti Consulting for an initial free discussion to see how we can help you grow your margins which in turn will improve businesses performance and profitability.
