Ideas to Stimulate Cash Flows in Downturns

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Parag Utekar
Student (MBA), India

Ideas to Stimulate Cash Flows in Downturns

🔥NEW In tough economic times, corporate business leaders have difficult choices to make. Their strategic, long-term concern must be to ensure that the business models, strategies, and systems provide the foundation needed to confront the turbulence. Companies must strive to improve their ability to respond faster, withstand the economic pressure with minimal impact on its functionality, and show resilience. Defining which new strategic behaviors would help, is a crucial aspect of the process.

In current Covid crisis, business leaders have rightly focused first on urgent, short-term issues like their employee and customer safety, and also the security of their supply chains. The next step is to manage near-term revenues and expenses. Companies have to be aggressive about near-term revenue and expense management while being sensitive about current customer needs.

Yoon and Lochhead recommend 5 interesting complementary actions to balance such empathy for customers with short-term business economics:
  • ENSURE NEAR-TERM SALES BY GENEROUS GUARANTEES, RETURN POLICIES AND WARRANTIES: The companies can take a risk by offering generous warranties and return policies to calm the nerves of the customers.
  • IMPLEMENT NEW PRICING/REVENUE MODELS: The companies must look for adopting a new pricing/revenue model for their customers, many of whom would be interested in buying the products being offered at a significant discount. This may also include alternate revenue models, including gift cards and subscriptions, as opposed to traditional transactions.
  • PRE-RELEASE NEARLY READY INNOVATIONS: Many companies are often risk-averse when it comes to innovation. But customers may be looking for some distraction and like experimental, new and improved product and services, even when they are released before all the problems are resolved.
  • CUT MARKETING COST: Cut in marketing cost, especially those with little evidence of customer awareness or impact.
  • ENGAGE IN SPECIAL KINDS OF CUSTOMER ACQUISITION: Companies must actively look for new customer segments to acquire during the time of crises. Companies with low marginal cost like software, training, and services can provide certain services for free and convert customers into paying ones a little later. Companies that are financially strong should now acquire weaker ones, bringing aboard new customers, cross-selling opportunities, or new business models.
Companies should not be too defensive during crises like Covid-19. Rather they might go for the offense by combining customer generosity and thoughtful aggressiveness as principles. As the popular witticism in American English and the famous song by Billy Ocean (1985) goes: "When the Going Gets Tough, the Tough Get Going"...

⇒ Any other or better 😃 ideas to stimulate cash flows in a downturn like Covid-19?

Sources:
Strategic Direction, "Business as Usual: How to Survive an Economic Downturn,"(2010), Strategic Direction, Vol. 26 Iss 6 pp. 11-14, Emerald.
Eddie Yoon and Christopher Lochhead, "5 Ways to Stimulate Cash Flow in a Downturn", April 2020, HBR.

  Graham Williams
Management Consultant, South Africa
 

Ideas to Stimulate Cash Flows in Downturns

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