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Become a giant during times of recession

Mar 18, 2013

Consumer spending is down and so are retail and media profits, by a lot. But South Africa can avoid a damaging retail and media recession - and help create an economic upturn relatively quickly and easily.

Shares in major retailers like Mr. Price and Shoprite are down 19 percent and 17 percent respectively this year and most media houses have made breathtaking cuts. But Liza van Wyk, CEO of major management training organization, AstroTech Training in Johannesburg said this could be reversed. "South Africa is moving into a dangerous cycle of reactive recession, with fears about drops in consumer spending seeing retailers no longer training staff as well as they had in the past and that is leading to declining sales.

"We have seen blood on the floor at every media house, and yet the world’s richest man, Warren Buffet is on a massive acquisition trail of newspapers, especially small community newspapers. He is set to become the biggest media owner in America. So what is he seeing about the future that conventional publishers are missing?"

Van Wyk said that "fear creates its own reality. If you look at negative spreadsheets all the time, you’re not lifting your head to plan for opportunity. That takes future thinking and risks, but too many managers are becoming fixated by the short term, and that’s not good." She said that good performance in the retail sector ensures bigger ad spend for the news media. "The two sectors need to see how their future performance is intertwined and develop strategies to aid each other."

Van Wyk said that in the past salespeople were "walking brochures" but today they need to be "empathetic, solution-driven, and innovative. Many companies want salespeople to follow tight scripts, and that is not how human relations function. Consumers are struggling with tight budgets, they want salespeople to show them how buying this product will add value to their life and help them cut costs.

"Now is the time for businesses who want to beat this recession to become skillfully aggressive. Warren Buffett said earlier this month that executives who hold back investments because of doubts about the economy are missing an opportunity. He will accelerate capital spending at Berkshire Hathaway Inc. this year. The rule is this: you either grow during a recession and become a giant in prosperity or slash so much during a recession that you’re too weak to prosper when good times come, and will often collapse just as markets start rebounding."

Van Wyk quoted Buffet who said: "There was a lot of hand-wringing last year among CEOs who cried ‘uncertainty’ when faced with capital allocation decisions despite many of their businesses having enjoyed record levels of both earnings and cash," Buffett wrote in his annual letter to Berkshire shareholders. "We will keep our foot to the floor and will set another record for capital expenditures in 2013. Opportunities abound." Van Wyk said, "we need to change our focus on gloom to look through the murk and seeing the lights of opportunity ahead."

She quoted international research that said salespeople are now the single largest factor (39%) in a customer’s purchasing decision. No other factor - product, quality or pricing - equals the impact of a salesperson. "In our courses for managers and salespeople we advise:

  • Hire better performers
  • Select better management
  • Align existing people to roles in which they will succeed
  • Improve individual development through ongoing skills training
  • Encourage staff to focus on fewer clients and develop them better, rather than have a few sales staff concentrate on a broad spread. "They can’t service anyone effectively," Van Wyk said. "We have seen in the media too where staff cuts have meant fewer journalists are doing more and often media coverage has become skimpy. Lower circulation or reduced listenership or viewers is, in part, a reaction to that."
  • Integrate sales and marketing. Research shows that customers value a sales consultant who can serves as a strategic advisor. "The customer needs to feel that their success or comfort is more important to you than just making a sale," Van Wyk counseled.
  • Have competitive pricing. "Rather earn slightly less but have more clients and stay in business longer," Van Wyk advised.

And whether you are a retailer, a newspaper publisher or a manager in another organization meet your staff regularly to explain strategy and get informed buy-in. Southwest Airlines, for example, wanted employees to know that their prosperity is tied the company's prosperity. So it created an animated video with characters like Nick (for net income) and Marge (for margins), which was viewed by employees in discussion groups. Profitability rose because staff understood what was needed of them.

Mobil Oil saw increased productivity and profits when they consulted their truck drivers. Van Wyk noted: "Truck drivers are a direct link to Mobil customers. Once they were privy to strategy, they gave suggestions that went into product development. Earlier, Mobil's products were pushed into the market by R&D scientists and marketing staff, now that they consult with those who deal with customers, earnings and customer satisfaction have improved."