The front page of this morning's paper looks like something you usually find in the middle. The headline reads "Bargains Galore!", and the article is about how customers stand to gain from the massive discounts retailers are offering at the moment.

Elsewhere, a supermarket operator talks about how it was as if someone flicked a switch about 3 months ago, and everyone is now thinking much harder about what they buy.  At one level it's a real life example of what Malcolm Gladwell calls "The Tipping Point" - the level at which momentum becomes unstoppable.  Whatever the statistics show, we know we're in a recession.

What do we do?

First, take care of our heads.  Taking a cue from some work we've been doing with NBCoach members, remember that this is temporary, it's restricted to the business, and it's not your fault (but you can do something about it).   Of course there are some who say that things have changed forever because of oil prices.  While it's possible that oil prices will never revert to (I was going to say pre-something prices, but I'm damned if I know what the something is!).  Let's try again: oil prices might not come down much, but energy prices will, because the high price of oil will encourage people to develop alternatives (including oil reserves which were previously uneconomic).  Geoff Colvin wrote a great article in Fortune on how our capitalist system would resolve these issues (click here).  This too will pass.

Second, review your efficiency.  We always let things slide in good times because we're continuing to grow.  Now it's time to ask the question: how can you produce the same output with less resource?  What's the 80/20 - the 20% of processes or features that create 80% of the value to your customers? How can you dispense with some of the remainder as you look to improve your price? Certainly look to save pennies, but look harder for dollars - do you really need all those people?  Owners often find after reducing staff that they manage to produce the same output with fewer people.  A word of warning - don't be tempted by false economies.  If you're thinking of letting your PA/administrator go because you can do that stuff yourself, don't.  That's the dumbest thing you can do.  It's the road to inefficiency, stress and poor health. 

Third, think.  As I've said before, my personal philosopy is that as one door closes, a thousand flowers bloom.  There are always options, though some are less palatable than others and some are harder wrok than others.  Bruce Rankine, one of our long-standing members and a very good accountant/business adviser, made the point the other day.  The changing times create opportunities in segments that might have previously been out of reach. 

He used the example of a kayak shop.  In the past, the kayak owner's pitch was at people who wanted an entry level water experience that involved some physical exercise as well.  Some, of course, wanted to be on the water but couldn't afford a boat.  The kayak shop owner's opportunity is to reposition it away from the "natural" experience and more towards affordability, because there's a lot more people today who can't afford a boat.  But there's also a lot of people who either own a boat or would have considered buying a boat who've had to rethink.  In fact, there will be a whole lot of people selling their boat as a luxury they can do without for a while.  But they'll still want to be on the water, and the kayak shop owner has the opportunity to position the kayak as a cost effective alternative that's also a lot of fun (and good exercise as well).

The wider point is that straight discounting is the last thing you want to do (and for many insolvent businesses, it was actually the last thing they did). By all means, reposition your product or service to emphasise economy or value for money.  But at the same time, take out costs so that you preserve your margin.  If you simply reduce the price without changing the feature/benefit mix, you will struggle not only to get margin in the short term, but you've made it much harder to reposition at a higher price later, when the eocnomy picks up.  As it will.