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Figuring out how to operate profitably in a market against more profitable competitors offering similar products or services is no easy task. Charge too much and you risk losing potential clients or customers, too little and you’ll end up digging yourself into a hole that will become nearly impossible to claw out of, especially when you are already treading along thin margins.
If you already have a solid understanding of your monthly, quarterly and/or annual expenses, then you possess a clear picture of what your profit margins look like, but it’s vital to keep in mind that operating along thin margins for too long is an assured way of setting a business up for failure in the long run. Unfortunately, finding ways to broaden these margins isn’t any easier than figuring out how to compete in a market against more profitable competitors, especially when you don’t have the option of cutting costs. But there are ways that can help you compete — to create a more profitable business without having to keep its margins at the forefront of your mind.
Widen your value
Although revenue and profits are what ultimately determine a business’s ability to successfully grow, they are far from the only operational factors to consider. If you find yourself unable to widen your financial margins, begin looking to other aspects of the business that can be improved upon. In doing so, you will be able to generate additional value for customers elsewhere, and thus bolster your value proposition.
For instance, consider implementing methods that can add to the value of your customer experience (CX). According to a report published by the Temkin Group, companies with $1 billion in annual revenues stood to generate an average $823 million in additional revenue over three years by implementing even moderate improvements in CX. Ways of achieving this vary, of course, but most professionals agree that it starts with a top-down approach, beginning by empowering your employees with greater autonomy. By talking to your staff members, uncovering their own pain points and placing value in ideas they may have to better serve customers, your company’s internal culture will evolve into one rooted in award-winning CX.
Related: How the Customer Experience Affects Your Bottom Line
Additionally, consider implementing new tools like natural language processing software or chatbots fueled by artificial intelligence or machine learning into your CX strategy. Technologies like these have greatly reduced the time it takes to turn customer data into actionable insights for businesses, adding heightened, scalable and affordable tiers of personalization into every step of each customer’s journey. Because, according to Accenture, no less than 80% of customers want the brands they interact with to understand them, including their wants, needs and pain points. Similarly, research by Epsilon found that same percentage of customers were more likely to purchase from a brand when it offered custom or personalized CX.
In today’s world, personalization and customization at virtually every point of the customer journey is no longer a luxury but a necessity: your customers will expect no less from the companies or brands they do business with.
Related: How to Pick the ‘Right’ Clients and Stand Out Among the Competition
Develop new products to fill market gaps
When Steve Jobs announced the first iPhone in 2007, it was met with a mix of excitement and skepticism. Few of the early critics possessed the foresight to grasp what Jobs’s innovation would mean for the tech industry, let alone the world and society as a whole. For Apple, however, it set the company on a path towards becoming the first ever trillion-dollar business, and the iPhone’s share of the global smartphone market has jumped from 3.4% in Q3 of 2007 to just over 14% by the second quarter of 2021.
New product development is crucial to any business’s longevity, especially in the face of heavy competition. Forgoing it leaves operations static rather than adaptable, and makes irrelevancy all but inevitable in ever-growing and ever-changing markets, especially when margins are thin. So it’s vital to survival that you begin (and continue) developing and launching new products that fill in market gaps.
Once again, the smartphone industry is a great example of how this is done. Companies like Samsung and Apple continue to develop and release new and improved products nearly every year, replacing older models with ones that offer a broader range of amenities and other value. This allows those companies to not only remain relevant, but capture the ongoing interest of customers while simultaneously bolstering their margins.
Regardless of what industry your business is in or what its customer market is, developing new products and otherwise fueling innovation to address both new and existing market gaps is a necessity to survival, regardless of how thin your margins might be.
Related: How Much Should I Charge for My Service?