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How you grow your business will depend on how you stack up against your competitors, and how much demand you can create for your product or service.
Competing directly against big businesses is challenging. If you’re a small business, you’re more likely to grow your business by responding quickly to customers’ changing demands and tastes, or creating new demand.
You can grow your business by competing with other businesses in your industry to sell more of your product or service. However, bigger businesses are usually better at competing to get a bigger share of customers. For example, a big business can order more units of stock at a lower cost. They can then pass these savings on to the customer and offer a lower price. If you choose to compete in this way, you run the risk that your product or service becomes standardised, and potential for profits and growth are reduced.
If you own a smaller business, you’ll probably have more success responding nimbly to customers’ changing demands and tastes. Some companies have created new demand by forming whole new industries, like Trade Me in the online auction industry. However, a more realistic and achievable way to create demand is to create new space in an existing industry.
To create new space, you need to find out what your customers like about your product or service. How could you do things differently to make your product or service attractive to new customers? If your business is small, you can change course faster than a big business, helping you capture more of the new demand.
Here are four steps to help you create your own space in the market.
Start creating your new space by doing some research. Understand what your customers value about what you and your competitors provide. Creating new space in your industry may be as simple as linking an existing technology to what your customers want.
For example, customers might love the fresh food you provide from your small shop, but they might also get really frustrated with the long queue. Setting up online ordering could help you to create new demand, where customers order and pay in advance and then pick up their order without waiting.
Find out whether different customers want different things. Identifying who likes what, and why, may help you identify different ways to add value to serve different desires.
To find out what your customers want, try:
Consider what your competitors are doing, but don’t let it define what you do. You may want to try something based on your customers’ values that your competitors haven’t yet done. For example, if your customer community values fair working conditions, can you start selling only ethically sourced products? You could bring a more sustainable or more premium alternative to a market where all the current products are similar.
Look closely at your competitors. What do customers like about them? Do different types of customers want different things? What are your competitors doing to meet those values? Why are they failing to meet some of those values? Can you meet them?
Once you know exactly what your customers value, look for opportunities within your business. You don’t need to travel outside your existing industry to create your own space in the market. You might be able to attract people from your customer community who are looking for specific features. For example, offering a leasing option for a product that’s normally sold outright may appeal to customers who want convenience or can’t afford to pay upfront. And you can offer the leasing without changing your core operations. It’s about finding new ways to deliver what your customers value.
In your strategy planning worksheet, write down what your customers value, and compare it with what your business offers. Then write down ideas on how to extend that value.
Think about a product, service or mix you provide. Identify the elements that provide value to your customers. Think about whether your product has any service elements, or whether your service has any product elements. You might identify opportunities to add new value and create a new space for your business in the market. Write them down in your strategy planning worksheet.
Think about how to increase the value of your product to your customers and reduce costs at the same time. Finding your own part of the market is about more than doing things. It’s also about focusing better on your value by getting rid of the cost of things that don’t contribute to that value. For example, bulk discounts might be the norm in your bike parts manufacturing business. If you identify a demand for a good bike repair in your city, you could move away from bulk discounts. You save space in your store and use the space for a bike service centre instead.
If you compete head-on with your competitors, you have to make a trade-off between performance and price. By creating a new space, you can enjoy a niche without those trade-offs. Customers are often happy to pay premium prices for simple but unique products.
When you look for ways to increase the value of your product or service, most changes fit into one of four categories. Try one of these tactics if you’re having trouble getting started. Got an idea already? Reflect on where it fits, and record it in the strategy planning worksheet.
Think about what you could eliminate in your product or service. Even consider eliminating things your industry has relied on to create competition. For example, you might remove your long and varied restaurant menu and promote a fresh new ‘dish of the day’ — with just a few choices to meet dietary needs. A shorter menu saves you costs and preparation time. It also saves your customers time in choosing and waiting. Some people may be turned away by fewer options. But you’d get new support from others who want fresh, high-quality food at a lower price with faster service.
Consider the things about your product or service you could do much better than your competitors. For example, if you offer a pet-sitting service, you might let each owner know how their pet is doing during the day. You could send a message and photo in the morning and evening, or even offer a video call. These extras help establish trust with your customers.
Think about what you could create in your product or service that the industry has never offered. For example, let’s say you own a car workshop in the city where most customers leave their vehicle to be fixed during their workday. You could offer customers a free public transport ticket. Or you could drop their car off at their office at the end of the day. You’re offering something new that enhances a customer’s experience in an unexpected way.
Consider the things about your product you could reduce well below the industry standard. For example, let’s say you typically provide customer service via a call centre. If you’ve increased your social media presence and engagement, you could ask your customers to use those social media channels for enquiries. You’d reduce your call-centre costs while still providing acceptable service.
Look at how your business compares to others in your industry. Consider the different parts of your product or service and how they match up or don’t match up with your competitors.
Here’s a graph showing an example. Very little separates the two businesses. You and your competitor both offer snack products that are priced similarly and taste good. Customers also get the product with a similar level of speed and service. This puts you in direct competition.
Let’s see what happens if you look beyond what your competitors are doing. For example, you could add a new feature, ethical sourcing, and make sure you’re much better at it than your competitor.
Now you’re doing a better job overall, even though most of your characteristics have stayed more or less the same. By ethically sourcing your products and catering to your customers’ needs in this area, you’ve added value and separated yourself from your competitor.
What characteristics does your industry tend to compete on? How do you compare? What new feature could help you stand out? Use the strategy planning worksheet to explore your opportunities.
Remember that to deliver your new value, you may need to adjust value in other areas of your business. For example, could you reduce costs by downgrading or getting rid of something that your customers don’t really need?
Manaia runs a chemist and a retail space for health products. He’s been thinking for a while about how to make his business better and attract new customers.
He starts by looking at who his current customers are and what they want. Many of his customers are middle-aged parents with kids. He doesn’t get many younger customers because they mostly get their prescriptions from the nearby supermarket.
Manaia thinks about new value he can provide for existing and potential customers. He decides to remove his low-profit retail space and replace it with a café where parents can take a break with their kids. To keep the children busy, he creates a small play area with toys and books. He also carefully plans his café menu. He offers healthy food with vegan options, plus smoothies and juices.
Now, parents can relax at the café while watching their kids play and waiting for prescriptions. Younger customers can use a different entrance for takeaway vegan food and drinks.
Manaia also creates a loyalty scheme, which customers can use towards buying café food or health supplements, or paying for prescriptions, something that supermarkets can’t provide.