Last year was the 80th anniversary of the Great Stock Market Crash of 1929, and only those who can remember back that far have seen economic times worse than today.
Even the aging baby boomers have never seen times quite as difficult as today’s prices, joblessness and economic pinching. Thus: “The sky is falling! Crouch beneath your desk! Cut spending! Slash and burn!”
And, it’s true, recent figures show that a majority of large corporations are falling for the knee-jerk strategy to cut spending on marketing programs which always seems the first to go when times get hard.
For example, Dow Chemical raised its prices for all products up to 20 percent across the board with surging energy costs. They’ve never done that before. Dow’s increases will make a huge ripple through the consumer population affecting prices for plastics, antifreeze, solvents, cosmetics and pharmaceuticals to name a few. And, some of Dow’s biggest customers, like Procter & Gamble, are busy raising their prices as well.
It may seem counter-intuitive, but up to a point, it makes sense to power up your marketing when everyone else is cutting back. Certainly, if you are struggling to make payroll, or pulling your diesel vehicles out of service to save on fuel, there’s a point when you may have to retreat into survival mode. Still, it is a well-known fact that companies that increase advertising during hard times when their competition is holding back, improve market share.
At least explore ways to make your marketing look big for a smaller price. If you run radio commercials, for example, keep the frequency, but cut from 30-seconds to 15-second spots. Print your next batch of flyers with two colors of ink instead of four. The main thing is not to just quit running ads or printing flyers altogether.
The truth of the matter is, these fuel prices are not going down, and you are going to have to figure out a way to cope other than closing shop. Eventually fuel costs will be passed along and spread out through the economy. Everyone will raise prices for everything. And your survival will depend on increasing your prices as well. Your costs of operation are soaring, there’s no other choice.
You need to dig even deeper into the minds of your customers. How are they coping with this economy? What are they planning to cut or postpone? Do they understand the hidden costs of postponing asphalt maintenance?
Think about ways you might be able to cut costs and keep price increases to a minimum. The coffee distributors seem to have figured this out. Instead of raising prices, they just make their “pound” can of coffee smaller. Better idea: improve your product, extend your warranty, offer an attractive additive – something that can cost effectively raise the perceived value of your work and helps your customer understand the increase in your pricing.
Take a hard look at the distributors and vendors you use. They are no doubt nibbling at your bottom line, raising their prices on everything from asphalt loads to re-printing your business cards. Maybe it’s time to request proposals from other suppliers, just to make sure you are getting the best deals.
Be very careful here, however, because it is impossible to place a value on your existing business relationships. And, we’ve all been through the great fanfare of being someone’s newest, most favorite customer, then rapidly falling through the cracks as the newness wears off, and you become just another customer. So talk to your existing suppliers, ask them how they are coping. Explore ways you can work together to keep costs down. They might be willing to extend your financing or come up with creative discounts for you.
Look around at your competitors. How are they coping? Might there be some way you could join forces to gain quantity discounts on purchases or help each other with equipment swapping or even shared crews? You never know until you communicate. In the case of asphalt maintenance, you might have better success if you work with someone who is not in your immediate market area.
Please don’t forget about your employees. They are coping, too. Is there a way you can help them out? Free box lunches on the jobsite, or even a discount food club membership or some alterations in the way they get to the jobsite (pick them up at their homes) would be deeply appreciated, and might make the difference in a crew that hangs in there with you.
Maybe you can add a related service to increase your income. Switch fuel sources with infrared paving restoration to decrease your outgo. Pick up a sweeping contract or investigate pricing on striping equipment.
As a practical matter, when it’s time to increase your prices, prepare to be able to clearly state your reason. “Due to …. “ Talk to your customers. Be sure they understand increasing materials costs. If it appears the price increase is going into your pocket, there will be grumbling.
Do not just send out invoices with higher prices, give your customers some warning. And, consider two or three smaller increases over time rather than one big spike. And, frankly, be prepared to lose some customers. It’s a small comfort to realize their business probably is not going to a competitor; some folks just won’t have the money.
Just like gasoline prices, asphalt prices are ultimately tied to the price of crude oil. Understanding this fact will help your customers understand price increases in your services.