Some industries, such as pharmaceuticals, have been little affected, if not left totally unscathed, by the current economic crisis. Others, such as the engineering sector, have to cope with a sales plunges of up to 40 per cent. Even within industries there are winners and losers. The impacts appear to be highly selective. Professor Roland Heger, PhD, head of the Steinbeis Transfer Center for Business Development in Reutlingen, showed managers what they can do to protect margins during a crisis when he gave a talk at a client meeting of an industrial service provider.
Heger's invitation to present at a client meeting came from Stuttgart-based mateco AG, whose main business is renting and leasing access platforms and service cranes. For mateco’s customers, mainly industrial service providers for the construction and building services industry, he exposed how the current crisis also provides for opportunities to move business forward. Most companies react to a crisis by putting their prices down, in order to hold on to their markets. After all, that´s what their customers expect. But they don't always stop to check whether this is really necessary, or estimate the effect of price cuts on volumes and margins. When volumes go down and price cuts lead to tighter margins, companies suffer twofold: Not only do margins drop — so does supplier credibility. It is difficult to explain that it can lower prices during a crisis, but it cannot when orders are buoyant.
Mateco is not the only company to discover that there are alternatives. Right in the middle of the crisis, a welding technology supplier is currently introducing a new pricing structure, another is working on a new one for next year. These companies are going against the grain by deliberately reacting to sweeping price cuts in their markets, and more specifically addressing customer requirements.
The current economic situation opens up opportunities especially for those who do the right positioning. Solutions that reduce energy consumption, such as hybrid technology in the automotive industry, are more likely to attract attention, now, even though they are no cheaper than conventional technology — not for customers to acquire, nor for companies to produce. The crisis accelerates shifts in consumer behavior: For a number of years we’ve been observing meat consumption decline, now with increasing speed. At the same time, spending on ecoproduce, eco-technology, or products that embellish the home is up. Solar panel mechanics have plenty to do, and interior fittings are booming, while new private home building applications are approaching historic lows.
If your company does have market-ready products up its sleeves, do launch them, now. If you are developping new products and technologies, and still have the power to finance them, do not slam on the brakes. A crisis intensifies customers' craving for alternative providers, reinforces their willingness to try out new technologies, and raises the propensity to switch partners. During a crisis, people within companies are also more willing to strike new paths.
The Steinbeis Transfer Center for Business Development helps companies develop pricing models that match the needs of target groups, helps pinpoint growth strategies, especially for overseas expansions and the migration of business processes to the internet.
Professor Roland Heger
Steinbeis Transfer Center for Business Development (Reutlingen)
stz470@stw.de