North America

Chewing gum sales predict the future for your business model

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March 26, 2011

Written By: David Henderson, CEO – ROCG Asia Pacific 

An industry or a business model can become outdated in a much shorter period of time than would have been the case five years ago. Tie that in with the fact that a significant part of our business model relates to the value we provide to our customers, and you’ll see why it pays to rethink and review your business model if you plan to stay on in business much longer.

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Recently I attended a dinner with a group of people including a young 22 year-old. The 22 year-old was by no means a high income earner nor was she extremely tech savvy. To the astonishment of most of the dinner guests this young person revealed that she purchased chewing gum online. She had worked out that even with delivery costs included, it was a similar price to buying in her local market. OK, that’s fine but even so, why bother? Well, the winner for her was that from off shore she had access to a far greater range of flavors. Now from my viewpoint chewing gum is an on-the-spot purchase, instant gratification more than long term grocery planning, so I asked her about time frames. The chewing gum had turned up within three days. Previously, that purchase would have been made from a local supermarket, a service station or a convenience store. Today she may be purchasing from the USA, tomorrow it might be the UK.

So let’s go back over a few business basics and see how these are being affected in the brave new world.

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The only reason we have a business is … because of our customers.

The only reason our staff have a job is … because of our customers.

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If we don’t have customers then all the other business issues that we worry about become irrelevant. Without customers we don’t have a business, our staff don’t have jobs and our suppliers cannot sell us anything because we do not have any customers who want to trade for our goods or services.

So if customers are essential to a business, what does this mean?

It means that our customers (the type of customers that we want, that is) should be treated as the important part of our business that they really are. In the rush and bustle of our new technology-fueled world, where so much appears to be so different from a half decade back in time, it becomes easy to lose sight of this vital fact.

Currency fluctuations and the internet are affecting who is our customer

In considering our customer today we need to give more thought to “the type of customer we want”. That’s because the type of customer we are dealing with, and the manner in which we are dealing with them, might also be changing just as rapidly as so many other things.

The Internet is significantly altering the customers with whom we can potentially trade. The often repeated comment that “the world is becoming a smaller place” means that your local business might be trading with customers located in geographically distant places.

One of the new drivers for this is currency exchange rates, or more accurately the currency of your country, relative to other currencies that you might find yourself dealing with. Fluctuations in exchange rates can change your potential market within days. Whether or not you actively decide to take advantage of this new potential market won’t matter, because regardless of where your business is located, you are going to find that currency fluctuations will have a significant impact on your current customer base as well.

This has been dramatically highlighted in Australia where the exchange rate has emerged as a significant business issue as the Australian dollar ranged from $0.65 to$1.01 against the US dollar over the last eight months. The Australian dollar could keep going higher, or it could reverse.

In the US retailers are suffering from lower sales in their domestic markets. Given the downward movement in the US dollar exchange rates, this would be an opportunity for smart operators to actively try to capture cross border market share and take advantage of the fact that the US dollar is low and therefore that US products and services have become much more competitive on the global market. Eight months ago this scenario would have been reversed.

Five years ago very few businesses needed to consider this. Five years ago the average consumer would not have sought to purchase from overseas. Now they can, they will and they do. And the purchase, as we have seen above, may actually be for quite surprisingly small items.

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The message to business owners is that many local customers are actively engaged in international trade on a daily basis and, given the efficiencies of supply lines and delivery times, they are making their decisions based on choice and cost, not on location of the goods and services.

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Remember, we are talking of ongoing year-round buyer behavior, not just of a once-a-year choice to do annual holiday gift shopping online and avoid post office queues and mail lost on route – although already this has been blamed by many retailers for significant revenue losses.

We still need to engender loyalty and repeat business

From a business point of view the next question becomes, how do we engender loyalty and repeat business from a customer base that is in many ways faceless to the organization. There is no, or only limited, human interaction in many of these kinds of transactions.

The answer? We do it exactly the same way as we would have previously. By being different from our competitors, by working to maximize our business value model and by constantly reviewing it to ensure that it aligns with the needs and demands of our customers.

In the new world, the old rules still rule – you just need to be prepared to apply them faster, and in new ways!

Our business model or business value needs constant attention, fine tuning and careful thought if we are to keep attracting the right type of customer and supplying them with the goods and services they want to purchase.