Friday, February 15, 2008

Strategic Planning - avoiding the downward spiral

This week I'm at a convention that I really have enjoyed over the years. The trouble is, I notice that the numbers have been smaller, and the association is cutting corners on lots of visible things that affect my perception of the value of the meeting.

I envision the people doing the strategic planning for this event discussing their challenges and noting that, because attendance is off, there is less money to spend. Shouldn't we meet this challenge by spending less? Of course, the answer is yes, but I think it's critical to examine the distinction between costs that add value for customers and those that do not. When we fail to do this, customers notice that every year, things suck just a little bit more. A good example of this is the entire airline industry. Southwest Airlines took advantage of this by cutting to the chase and cutting deep very early on - and they still spend extra money on things that really do affect the customer's value perception. The rest of the industry is stuck on the downward spiral...diminished expectations driving down the customers' willingness to spend leading to less money...and so on...

How can we spot this syndrome in strategic planning - and how can we avoid it? It helps to ask - would customers pay extra to get certain things? It also helps to have a firm idea of who you are for your customers. If you are an association, do you deliver value the members can't get any other way? If you are an airline, are you a comfortable, friendly way for business travelers to get wherever they are going? If you run a construction business, do you get projects done on time and under budget? These are just some examples, but they can help make it very clear where you should spend money even when things get tight. Failure to do this makes you vulnerable to a competitor who does what your customers think you should be doing. Does this mean you may have to lose some customers who aren't willing to pay you to be who you are? Yes, it does. Do you have to choose which customers you want to target in strategic planning? You bet - that's one of the reasons why it's hard.

Next time you are discussing the challenge of a tighter budget in strategic planning, you might want to ask yourself where the value lies. You may be better off charging more and getting smaller numbers anyway than following the cheapest customers into the downward spiral.

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