As the economy continues to gain momentum, local businesses are being forced to re-examine their business plans, business models and strategies.
While a strong economic climate tends to indicate strength in consumer spending, there are additional headwinds for local businesses that can accompany a solid economic environment.
Low unemployment, increased investment in startups and new technologies and the potential for inflationary forces are driving local business owners to think more creatively and strategically.
As the CEO of a 15-year-old brand, and having run a company through both recessionary times and periods of strong economic growth, I’ve learned that the most successful businesses continue to evolve and adjust based on current market conditions.
Low Unemployment Rate
The Bureau of Labor Statistics recently reported a 3.8% unemployment rate. As the unemployment rate dips below 4% and is charging into record low territory, business owners are finding it more difficult to find and retain qualified employees.
While this poses a challenge, many business owners are searching for answers through innovation and automation. For example, in the carwash industry, there is a trend toward automated attendants. Driving up to a full-service carwash and being greeted by a person who asks what type of wash you would like is slowly giving way to an automated kiosk where you can select the wash type and pay electronically.
In the restaurant space, fast-casual restaurants are continuing to show growth year-over-year. While the American consumer is more time-conscious, which is helping fuel the growth of the segment, the fast-casual restaurant format is innovative when it comes to staffing. According to Adweek, fast-casual restaurants don’t require as much staffing as full-service dining restaurants.
And nearly full employment in the U.S. is forcing firms and agencies to direct more resources toward software tools and platforms that help manage accounts and place ads with fewer human resources.
With economic strength comes investment in startups and new technologies. These investments can ultimately lead to higher cost per acquisition (CPA) of new customers for local businesses. With consumers having access to so many new media and attention-grabbing technologies, more marketing dollars are required to ensure messaging and promotions are being seen by consumers. To offset the higher CPAs, local business owners should seek innovation in defined customer targeting and focus on tracking marketing spend.
Through demographic and sociographic targeting, you can ensure your message is being efficiently delivered to those who are most likely to respond to your content.
Data-driven direct mail solutions allow businesses to define specific audience parameters so their targeted pieces are hitting high probability targets and cutting down on waste. Data models can also be applied to social and digital platforms to ensure your content is speaking to the right audience.
Tracking response is also imperative to hold down rising CPAs. Use marketing tools that allow for defined tracking to ensure you are getting new customers through your doors. Furthermore, trackability also allows you to capture data on your new customers so you can potentially reach back out to them and create a customer experience that drives long-term loyalty.
Strength in the economy can also raise the potential for inflation. Local business owners must consider how inflation might impact their business. Higher labor costs and material costs may require local businesses to rethink their pricing strategies.
While increasing prices may seem like the easiest way to combat inflation, creativity in production and implementation of new technologies and strategies to reduce material costs can all be examined to stay competitive.
Some ways to help offset rising inflation without simply increasing prices include shopping vendors to ensure you are getting the most competitive prices, implementing more automation in product development and focusing on strengthening company culture.
Local business owners who are aware of both the upside and the challenges that come with a strengthening economy will be better prepared to benefit from strength in consumer spending and positive economic growth.