Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Wed Mar 04, 2009 11:13 am Post subject: Two Different Approaches or Theories For The Future
Joe and Tim both owned similar small businesses in the same town. Business was down about 25% at both establishment as it was throughout the town. Both men heard the news that this was a recession and both were concerned. They both formulated a plan of action.
Joe figured this might be a long-term problem, he reasoned he needed to contain cost. Joe increased his advertising and maintenance budgets. He doubled the number of radio spots he was running as his highest cost was the cost of having staff members under-utilized. He also knew replacing equipment was very expensive. Since he had staff members that were not busy, he took the opportunity catch up all maintenance. He also instituted a full maintenance program. Further he turned to grounds and building maintenance. Flower beds were cleaned and new plants were put in. The old sign post got a new coat of paint as did the parking lot fence.
Tim also considered the situation might be long-term. He also thought cutting cost was in order. Tim cut every cost he could, including advertising. He cut the number of radio spots in half, saving a good deal on advertisement. He defrayed maintenance and put off any capital improvements. “If it was not broke, don’t fix it,” and more money was saved. Since Tim also had staff members that were not busy, he decided to lay two people off. Cutting payroll further lowered his cost. Tim decided by watching every penny and not spending anymore than absolutely necessary he could raise profits and survive until things improved.
What are the possible outcomes from these two very different approaches?
Joined: 04 Sep 2007 Posts: 47 Location: Grand Rapids, MI, USA
Posted: Sun Mar 08, 2009 11:25 am Post subject: Re: Two Different Approaches or Theories For The Future
Louis Altazan wrote:
Joe and Tim both owned similar small businesses in the same town. Business was down about 25% at both establishment as it was throughout the town. Both men heard the news that this was a recession and both were concerned. They both formulated a plan of action.
Joe figured this might be a long-term problem, he reasoned he needed to contain cost. Joe increased his advertising and maintenance budgets. He doubled the number of radio spots he was running as his highest cost was the cost of having staff members under-utilized. He also knew replacing equipment was very expensive. Since he had staff members that were not busy, he took the opportunity catch up all maintenance. He also instituted a full maintenance program. Further he turned to grounds and building maintenance. Flower beds were cleaned and new plants were put in. The old sign post got a new coat of paint as did the parking lot fence.
Tim also considered the situation might be long-term. He also thought cutting cost was in order. Tim cut every cost he could, including advertising. He cut the number of radio spots in half, saving a good deal on advertisement. He defrayed maintenance and put off any capital improvements. “If it was not broke, don’t fix it,” and more money was saved. Since Tim also had staff members that were not busy, he decided to lay two people off. Cutting payroll further lowered his cost. Tim decided by watching every penny and not spending anymore than absolutely necessary he could raise profits and survive until things improved.
What are the possible outcomes from these two very different approaches?
Louis:
To just comment on the marketing, I have found that most shops can increase their marketing effectiveness without increasing their budget (many can even decrease it) since such a large amount of what is done in the area of marketing often provides for a poor ROI.
It's kind of funny that the most effective methods often cost very little, while the pricey ones frequently do very little other than to make the owner feel good about doing something.
_________________ Tom Ham
AutomotiveManagementNetwork.com - Hams Management Systems
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Sun Mar 08, 2009 8:50 pm Post subject: Re: Two Different Approaches or Theories For The Future
Tom Ham wrote:
Louis:
To just comment on the marketing, I have found that most shops can increase their marketing effectiveness without increasing their budget (many can even decrease it) since such a large amount of what is done in the area of marketing often provides for a poor ROI.
It's kind of funny that the most effective methods often cost very little, while the pricey ones frequently do very little other than to make the owner feel good about doing something.
Hi Tom,
Certainly money can be wasted on anything with enough incompetence, our political system makes that abundantly clear. Increasing marketing presupposes the business has a product or service that is desirable, has a market and that they make money when they sell it. Also presupposed is that the money will not be squandered.
It's said that nothing will kill a bad business faster than great marketing.
Reaching a wider audience of people will have little effect if the service is mediocre. Rather, reaching more people who feel mediocre is adequate will be more effective.
On the other hand, if a business has something of value to sell, there is a market and profit is made from selling it, logic dictates reaching more people with marketing will be effective. ROI would depend on the number of clients gained and the amount they spend, as much as the amount spent. Not accounted for might be repeat clients and referrals gained from folks marketing brings in.
Staff un or under-utilized, no growth, jobs taken that should not be because the business is slow, low morale brought on by low sales, the cost are staggering, yet rarely accounted for. I think these too would need to be added into the equation to find a truer figure for ROI.
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot vote in polls in this forum
FAQ
Search
Memberlist
Usergroups
Profile
Log in to check your private messages
Log in
