The year 2021 is coming to an end with a lot of goods costing almost double what they did in January. Inflation has marred the little progress recorded by small business owners since the hit caused by the Coronavirus pandemic of 2020. The little optimism which came from the lift of the lockdown, roll-out of the vaccination program, and reopening of several industries has been dampened by these happenings. We are seeing prices increase across the board. In fact, no sector has been spared.
Why does this affect small business owners more than their big counterparts?
The cost of raw materials has significantly risen. Several operations costs from rents, to utilities, have also gone up. The result is that every business has to pass on this cost to consumers in form of higher prices. Both big, medium, and small businesses have to do this.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
However, the big businesses have economies of scale to their advantage. Due to large purchases and production scale, they can afford to only increase prices slightly and still stay profitable. For small and medium-scale businesses, the story is different. Trying to compete with the ‘big guys’ in pricing will be near impossible. Even if you had stocked up before the price went up, you will run out of supplies sooner or later.
There are a couple of suggestions I think small business owners can apply to cushion the effects and try to stay a bit competitive. These tips may be more for businesses that sell physical products, but they can be tweaked to apply to other kinds of businesses.
Up your customer service game
As an entrepreneur, you can foster a more profound, more grounded, more close-to-home relationship with your clients and customers. Client support/customer service has the same amount of significant worth as any product, solution, or service that you offer. Truth be told, 90% of individuals use customer service as an influence when choosing whether or not to patronize a brand.
Many bigger brands will not be able to pay much attention to customer service, just because of the sheer size of their customer base. As part of creating an excellent customer experience and managing your online reputation, use constructive feedback from customers to improve your services. This shows them that you care about their experiences and sets them apart from the pack.
Differentiate your product
Since you already know that you cannot win this fight on the pricing scale, work towards differentiating your product from what is generally available. Add some little ‘frills’ here and there, something extra to keep going. Improve the quality of your product so that when consumers are trying to justify their reasons to purchase from you, they can find logical reasons too. Things like speedy complaint resolutions, quicker deliveries, request for reviews and feedback, and the likes can do a lot to influence more of the market your way.
Value-added services
There are some value-added services and benefits that could actually influence some customers to choose small businesses over the bigger brands. In addition to your improved customer care, you can look at things like offering warranty, installation services, discounts on subsequent purchases, etc. All of these could be part of a customer loyalty program where customers get small perks for choosing you over others.
Identify and stick to markets where you have the highest proficiency
If you can identify markets that give you some level of control due to your high level of proficiency and comparative advantage, this is another way to go.