Joseph Stasio has a clear and stern message for businesspeople navigating the weather of the current economic storm.
"Customers still need your services if it provides real value," said the associate professor of marketing and entrepreneurship at the Girard School of Business at Merrimack College. "If it doesn't, yours will be the first to go."
He's not just speaking as a wise professor; Stasio also has had ownership interest in 15 companies over the past 40 years.
Drawing on his academic and business experience, the professor provides the following five strategies to help business owners improve their value proposition during hard financial times.
1. Refocus on your existing customers
When sales begin to sag, the usual reaction is to go after new business. Stasio says, instead, in hard times businesses should concentrate their efforts on leveraging their existing customer relationships to look for new business opportunities.
"Very often, companies don't understand their relationship with their existing customers," Stasio said.
That's a mistake, he said. Because if you have a good relationship with your customers, along with a good grasp of their needs and how they are using your product, "new products and new services can arise because of your relationships with your current customers."
He cited an example from one of his companies, Cardea Technology, Inc., a medical software firm in Somerville.
Cardea has one major software product that helps doctors interpret and manage bone density scans. By getting to know the needs of the doctors and hospitals who use the program, Cardea has been able to do ancillary software projects for these hospitals and physicians.
"Doctors have made tremendous suggestions to us about new functionality for our software which helps us to expand our business," Stasio said. "We can now offer things to doctors that we weren't able to before."
The professor pointed to another example of customer-driven innovation, this one at a chain of five pizza stores on Boston's North Shore.
Stasio owned and operated the stores for 15 years starting in the 1970s. At some point, one of his good customers, a lobster fisherman, brought him a lobster so the fisherman could have the meat on his pizza.
"It became a bigger seller," said Stasio, until it became too expensive to continue.
2. Look for opportunities to embrace competition
While operating the same chain of pizza places, Stasio formed a buying cooperative with other pizza restaurants. The resulting bulk-purchasing ability got all of them a significant discount on mushrooms and cheese.
At one point, he said, they even had a small warehouse.
"The effect on the bottom line was pretty dramatic," he said.
Plus, he noted, such cooperation between companies with similar purchasing needs can be "very practical and it pays immediate dividends."
That little pizza operation has given rise to another salient business illustration: the art of cross promotion.
The pizza chain printed up promotional coupons that were handed out at neighborhood liquor stores. When someone bought beer, the liquor store put a pizza coupon into their bag. The coupons cost very little, the liquor store was giving their customers added value at no cost to their own business, and the pizza chain was reaching potential customers.
3. Be targeted in your advertising
Businesses should continue to pursue new customers in challenging times, Stasio said, but in a limited and highly targeted way.
"Because resources are so limited in this economy, small businesses have to be smart about spending those dollars," he said. "What are you trying to accomplish? Every dollar must have an objective."
Coupons, Stasio believes, "are a very good way for small companies to stimulate business in short, targeted spurts and see the results of their investment."
Plus, coupons provide a measurable return for the promotional dollar.
Stasio believes it's important to determine a reasonable expected return on advertising dollars.
"Get away from good will and just getting your name out," he advised. "What will create the best return for the ad dollar? The more a business pays attention to that paradigm, the better they can measure the return on that money — and feel better about spending it."
Advertising and promotions that get people to act on the information, he said, provide the best advertising dollar value.
"Providing incentives to buy more or new things, or get involved in their business in ways that will generate additional revenue," are examples, he said.
Advertising also needs to address the immediate concerns of the customer. When doctors suddenly received 50 percent less for a bone scan report, Cardea Technologies began stressing the money-saving benefits of their software, rather than just its functionality.
"Because of the fear and threat in the environment, we changed our message and added a whole new section to our Web site that focused on ROI," Stasio said.
4. Tighten up, but don't be penny wise and pound foolish
In hard times, what used to seem like a reasonable investment suddenly begins to look like an unnecessary expenditure. Resist the temptation to cut back on things that will have long-term consequences.
"Many smaller organizations, in an attempt to tighten their belt, begin to reduce certain expenditures," the professor said. "They might reduce bonuses and employee or customer reward programs. They begin to cut back on advertising and promotional efforts."
It's true, such actions can save dollars in the short term he said, but not without caution.
"In the long-run, they are sacrificing market growth and organizational continuity for the sake of a few dollars," he said.
5. Don't be quick to discount your core value
"In my pizza shops I would never ever discount the product," Stasio said.
"I gave away free soda, T-shirts, special promotions," he added. "On your birthday, if you could prove it, you got a small cheese pizza. I didn't want to devalue my pizza. But I was able to promote very well nevertheless.
Before discounting your core product or service, reflect on how the customer will perceive this. Are you desperate? Were you gouging before? Is your product somehow lower in quality?
"It's all about value," Stasio said. "The more a small business thinks about the value it provides in the marketplace, the more opportunities it has to deliver innovative solutions."