I had a client who wanted me to run their business and help them make a lot of money. When I started, they had almost no competition and a thriving business. People enjoyed the great service, cleanliness of the business and the snacks being served. Soon, a few competitors opened their doors within a couple miles of this business.
Business declined a small amount, but my clients reacted in a very negative manner. Instead of seeing this as an opportunity to outshine the competition, they cut their expenses in anticipation of a prolonged drought of customers – cutting service, eliminating some of the cleaning products being used in favor of cheaper, less effective ones and eliminating some of the sodas and snacks that customers were expecting when they visited.
The customers who had not left in favor of the competition were shocked to see that they were being punished for sticking with my clients. They began grumbling, then eventually they stopped going. So instead of having a glass half full of customers, they had a glass pretty much devoid of any customers. I am amazed that they are still open, despite the poor income and the damage to their reputation. Sure, the cut in costs had a lot to do with them staying open… but it is also part of the reason they lost so many customers.
In business, keeping expenses down is smart. But cutting expenses at the expense of your treatment of your customers is like going to the hospital for excessive bleeding, then shooting the medical staff trying to help get a transfusion into you. You hurt yourself and you make yourself look bad.
I had to fire this client, because they were ignoring advice and using kneejerk tactics to respond to conditions in the marketplace. They saw it as another cut in expenses.
Scarcity mindset is dangerous. It makes you believe that only a finite set of customers exist in any market, and that any competition is going to take business away from you in direct proportion to the increase in their business. If this were the case, whenever someone bought a case of Coca Cola, Pepsico would be howling. The fact that both of these companies are still in business proves that the market can expand. Just because someone never drank a Coke in their lives, does not mean they might not try a Pepsi – and vice versa. When someone chooses a beverage other than their product, these companies go out and find another new customer from the universal set of humans. Neither of these companies ever expects to get the entire human race to drink their product, but as long as they are continually adding one new drinker to their customer list, they are growing.
If Pepsi decided to cut their advertising, buy cheaper ingredients and shortcut their production processes in order to compensate for someone choosing to drink a Coke, they would start losing their current customers. Scarcity mindset is not the right way to look at business. If your share of the pie is not big enough, expand the size of the pie!
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