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Thursday, 23 April 2009

'The Aldi Affect'

According to a very interesting article on Smarta Aldi seems to have got it right when it comes to an economic down turn. It is a simple case of cutting unnecessary costs without compromising on quality. At Aldi they bulk buy their products and only sell one brand of each product. This reduces their costs, but not their range or quality of products. Whilst small businesses obviously will not necessarily be able to bulk buy to the same extent it may be worth considering reducing variety but offering one or two very good quality products or services.

SMEs should also look for other ways to cut their costs without damaging the quality of their service. Shop around for energy suppliers, marketing agencies and temp agencies. Make sure that you have the best possible deal for all of these and see how much you could save. There are also the little things which all add up. Turn off all plug points (that do not have to be left on) at the end of every day. A power surge extension lead uses electricity just to keep on its warning light, it all adds up.

I recently bought an Original Source shower gel which instead of being in a bottle, was in flimsy plastic packaging. All over the packaging it said they had used 75% less plastic by making this change. The bottle/packaging only goes in the bin when you are finished anyway and I knew that the shower gel was still the same good quality, so I bought it. This change attracted customers in two ways; using less plastic is better for the environment which is what Original Source emphasised and it cut their costs which is why I bought it; on special offer. Recent studies have shown that consumers are more likely to buy a ‘green’ product than a non-environmentally friendly one. So communicate to customers how you are helping the environment and why it makes your product better than competitors. Fancy packaging may attract new customers, if the price is right but unless the product is of good quality they will not become regular customers.

Obviously the purpose of all this cost cutting is to reduce your prices, not just increase your profit margin. Communicate with consumers, put a note on your packaging or in your advert saying that you cut costs to reduce prices and the product is still as good as ever.
This will reassure them and should make them appreciate your efforts, increasing brand loyalty in the long term.

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