Aaron Rodriguez explains how an SME can respond when the competition starts a price war

As with any decision in life, one has to consider not only the alternatives evaluated, but also the option of simply backing down and doing nothing for the time being. The decision of whether or not to respond to a competitive threat is no exception. Aaron Rodriguez, a business management and sales expert, provides the necessary information for an SME to know how to respond to a price war initiated by a competitor in the same market.

When the competition cuts prices or is launching a new product at low prices, we must begin to consider whether there is a less costly response than the expected loss in sales. To do this, calculate the cost of the “do nothing” option, which corresponds to the gross contribution of sales that would be at risk.

“The ideal response would be to lower the price only for highly price-sensitive customers, without lowering the price for less price-sensitive customers who have a low probability of stopping returning. This can be achieved by launching a Flanker or combat brand, by launching basic versions of the product or service we are selling, or by using any of the other segmentation tactics. If the answer to the above question is yes, we must ask ourselves why the competition decided to compete with low prices and how much it has to lose if it enters a price war. This will help us determine the probability that, if we lower our prices, the competition will lower theirs again,” Rodriguez explains.

If you think this probability is low, it would be appropriate to respond in the most segmented way possible. But if, on the other hand, you think there is a high probability that the competition will cut its prices again, you have to ask yourself whether these multiple responses still cost less than the expected loss in sales if you don’t respond. To do this, one has to consider the total cost of the possible price war, taking into account that once the competitor gains sales, it will have more to lose.

“If we believe that multiple responses cost less than giving up threatened sales, it would be correct to respond,” Rodriguez points out. “If, on the other hand, we believe that the cost of not responding is lower, we should analyze how much our position in other markets is at risk if the competitor gains sales. If the threatened products are complementary to other products, then losing sales in a threatened line would also mean losing sales in other related lines.”

If you believe this will not happen, you accept this new reality and assume the expected loss in sales. But if you believe that other lines of business are at risk because of the primary threat, you must ask whether the value of the markets at risk justifies the cost of the response. To do this, it is also important to determine how important the threatened markets are and what the long-term value of retaining those markets is.

Rodriguez says, “At the end of the day, if we conclude that the value of all markets related to the originally threatened market is worth no more than the expected loss in sales, then we accept or ignore the situation. If, on the other hand, we believe that the cost of not responding is greater than the value of the markets at risk, we should respond.”

In summary, the response to the threat of a competitor cutting its prices depends on two elements. On the one hand, whether the competitor is strategically stronger or weaker than your business and, on the other hand, whether or not the price cut is financially justified.

If the competitor is strategically weaker than you and the price cut is not financially justified, you should ignore the situation and not lower prices, as there will probably not be a big impact on your business’ sales.

When the competitor is strategically equal or stronger than you, it means that this threat will surely affect your position in some of the segments you currently serve. In this case, you must accept this new reality, not by lowering prices, but by accommodating and focusing our strategy on other market segments.

If the competitor is strategically equal or stronger than you, but the price cut IS financially justified, it is of utmost importance to defend yourself in a segmented way that we will see in the next module.

Finally, if the competitor is strategically weaker than you and the price cut is financially justified, it is because you are probably facing an opportunity to serve a market segment that you may not have identified before.

Aaron Rodriguez explains how to identify the skills gap in a company

If making your workforce more competitive in the marketplace is part of your training objectives this year, that means it’s time to identify the skills gap in your employees. As the name implies, it’s a significant gap between the skills needed by an organization and the current skills of its workforce. It is the moment when a company realizes that it cannot move forward, maintain its previously defined objectives, or be competitive with respect to other companies unless those skills are learned or improved. Aaron Rodriguez, a business optimization expert, provides a detailed explanation of how business owners can more easily identify if there are skills gaps.

Identifying this gap is crucial to designing effective and focused eLearning training programs. Often, companies implement new programs without a clear understanding of the existing gaps in their workforce. This only leads to poor results. There are several benefits of analyzing and identifying the skills gap in your company since it analyzes the organization as a whole. It analyzes existing skills and lets you know if employees can learn new skills through training, or if you need to hire different workers, and also gives you an idea of what kind of training is required first, and where you need to invest more money and time.

In order to know the skills gap in your company, start by identifying your company’s goals. While it sounds good to have well-rounded employees, in the end, your business probably needs one skill more than the other. “By identifying your company’s goals before you make any decisions, you’ll be able to identify what training your employees need, now and in the future. That’s how you’ll know whether it’s more important to focus on technology training, customer service skills, even both, or something else,” Rodriguez explains.

It’s important to keep in mind what skills are required to achieve those objectives. To make sure you’re not training your employees in the wrong areas, you first need to identify the skills most needed for each job in the company.

Start by grouping jobs together. In other words, if you have Technical Support Representatives and Customer Service Representatives, they are likely to require similar training. Rank your skill priorities. After you have determined how to categorize and group jobs, you now need to prioritize skills based on job level. For example, a senior team member or supervisor would require expert-level skills, while others may require only basic knowledge. Next, create a list of these skills and make sure managers are aware of the knowledge expected of their team members, and how competent they should be.

Identifying the skills your people already have is a key point. Now that you have a clear idea of your business priorities and the skills required for each position, you will need to determine if the people filling those positions are well prepared to perform their jobs. Gather the data, analyze and compare. A Skills Gap Analysis is a comparison of the skills the company needs and the skills that employees have. The difference between the two is the skill gap. In simpler words, Skills Required – Skills Known = Skills Gap.

Once you have found the skill gaps, consider several aspects in your review process. Start by making a list of the skills your workforce is lacking and the training they need to fill these gaps. Consider wat skills are needed for new hires, as well as the training required for different groups or teams. Employees who have demonstrated exceptional or leadership skills and could be promoted. Remember to always keep in mind what skills are needed in the future and what can be done to prepare.

Rodriguez says, “Once you know what the gaps are and where they are, it’s time to start closing them. At this point, you can begin to design an action plan for training and hiring. Because of the time and expense associated with training, it’s best to start by closing the most crucial gaps, so it’s definitely important to have your priorities in order before developing your training program.”

Each plan should include reasons why employees should improve these skills, the best ways to address the gaps, the support required to complete them, and a date by which the training should be completed. You have a wide variety of options for closing the gaps, including coaching, mentoring, online learning programs and others.

Aaron Rodriguez explains how to create customer loyalty through marketing

Customer loyalty strategy is the most profitable strategy that any company can adopt. To discuss the subject in more depth, it is necessary to understand several of the most effective customer loyalty marketing techniques. Remember that the key to customer loyalty is the relationship between the company and the customer. In order to create and nurture that relationship, regular communication with the customer is necessary. Aaron Rodriguez, an expert with years of marketing-related studies, explains how customer loyalty can be increased through today’s marketing styles.

The customer is constantly receiving stimuli and advertising that try to get his attention. On top of that, he or she is so busy with a thousand things, personal and professional, that once he or she has bought a product or obtained a service, they usually forget about the company. To avoid disappearing from their mind, customer loyalty marketing is based on regular communication. Without it, the customer “cools off,” puts you on the back burner and no longer takes you into consideration.

However, many companies do not use customer loyalty marketing properly and the only regular communication they do is to send new offers by email, or only call the customer when they want a new purchase. This is definitely a mistake. This way of acting gives a very self-serving image on the part of the company because the key to regular communication that achieves customer loyalty is to provide value for the customer. In other words, the company communicates with the users to get to know them better and seek solutions to their needs and not only when it is interested in selling.

“The basic premise is that every time we communicate with the customer, we provide them with valuable information. This way, when we have a launch, offer, or promotion to offer them, they will be much more receptive to buy. If the company only remembers the customers when it wants to sell them something, not only will we not have built customer loyalty, but quite the opposite,” Rodriguez explains.

There are several ways to put these basic principles into practice. First is the automated communication sequence; a marketing technique to build customer loyalty. Using an automated communication sequence or better known as the autoresponder, this customer loyalty technique can be applied with ease.

Email should be the backbone of this sequence for several reasons. First of all, it allows sending relevant messages to the customer through a good segmentation of the customers, classifying them according to interests, purchases, geography. If CRM (Customer Relationship Management) does not facilitate these actions, the company’s customer loyalty capacity will be affected.

When it comes to building a sequence of messages, there are several effective communication ideas once the prospect’s email address is obtained. For example, thank you messages after the purchase. Be grateful and thank them for choosing you. Take the opportunity to remind them that the company is at their disposal to solve any questions or doubts.

A message to know the opinion of the service or product is never too much. It is advisable to send this message several days after the purchase or consumption. Each opinion will help you to know if the expected value is being obtained, as well as to communicate to the customers that their opinion counts and that it is important for you to improve. If the customer answers positively, you should take advantage of the opportunity to ask them to use this opinion or review on the web, or ask them to write it themselves on pages where customer opinions are shown.

There are also messages sending some useful information. For example, content with information related to the subject of the product that has been purchased or contracted, other services or areas of work of the company that may be of interest. The key is to provide valuable content every time you contact the customer, either with information, thanks or a warranty. And finally, sending messages with exclusive discounts, when noticing that the client is already a loyal customer, is a very good strategy.

Rodriguez asserts, “The key to customer loyalty marketing is to build a sequence with the options the company has. The first two tips (thank you and feedback) are basic and it is highly recommended to apply them in all kinds of businesses; they have a very positive effect on customers.”

Never leave social networks aside. The use of social networks is another effective marketing technique to build customer loyalty. Networks are not so much for selling and campaigning, but to demonstrate to users that social networks are a channel for listening and bidirectional communication between the company and the client/follower. The networks allow to humanize the brand and seek fluid and transparent communication.

In short, customer loyalty marketing is based on knowledge of the public and communication that provides value. Automating it through a marketing and sales CRM and complementing it with dialogue on social networks are two key techniques that enable the company to build customer loyalty and turn them into true prescribers of the brand.

Aaron Rodriguez discusses the importance of creating a business plan for startups

Before launching a new business, careful planning is essential. One of the pillars of this process is the business plan, a document that describes in detail how the new service or product will work. This is an essential tool to get the business up and running without any negative surprises. Aaron Rodriguez, a seasoned expert in implementing business plans, explains the true importance of starting a venture on the right foot through certain necessary business plans and strategies.

It is never a good idea to be lax in developing a business plan. Invest the necessary time and effort, and do not neglect any item. Otherwise, you will suffer consequences later on, with unforeseen events when it comes to implementing the project. In general, the final document is usually 30 to 40 pages, on average.

It is also important to keep an open mind to changes and revisions. During the development of the business plan, the entrepreneur may feel the need to review the concept, idea, or opportunity. “The business plan is not a whim; rather it is a huge necessity whenever you plan to start a venture and often goes beyond convenience,” Rodriguez says. “When the entrepreneur intends to join an incubator or get help from investors or funding institutions, the document is a necessity.”

The reason is obvious. No one will invest in or give opportunities to a project that does not prove viable. Since, in these cases, the importance of the plan is even greater, one option is to hire a junior consultant from a university who can guide you on the right path when it comes to creating such a document. Being able to get advice to take the first steps has never been superfluous. On the contrary, when forming the basis of a company is of utmost importance to start on the right foot to then not have to run into a lot of problems.

The plan will estimate the total investment for the implementation of the company. “The first thing to do in the business plan is to establish the activity of your company. Detail the branch of activity, establish the mission and make a summary of the main points of the plan, as an introduction. Here you should also establish the tax regime, the legal form, and the capital stock of the new company,” Rodriguez explains.

Market analysis is a concept that should always be considered during these early stages. It is the first study that will serve to analyze the viability of the endeavor. Conduct in-depth and meticulous research on the market segment you plan on entering. It is imperative that you know who the competition will be, strengths and weaknesses of others in the market and the profile of customers in quantitative and qualitative analysis. In this item, you should ask yourself the following question; “Why will customers choose my product and not another?” Start thinking about your competitive differences and why the answer would be in your favor.

Once the product offered and the customer profile has been defined, the next step is to define how the service will be marketed. Establish prices, product presentation, a form of distribution, promotional strategies, and also brand communication along with the target.

Once the above points have been established, it is time to think about what you will need to get the business up and running. Start with the organizational structure, designing the necessary human resources and their hierarchical distribution (the company’s organization chart). Think about the qualifications required for each professional, the remuneration, is and the infrastructure and location of the work environment.

“Focus on the financial plan, since it is considered the most relevant aspect when creating a business plan.” Rodriguez asserts. This is because it will estimate, taking into account the requirements detailed in the previous items, the total investment for the implementation of the company. It should also include estimates of fixed costs, the need for working capital, and a forecast of turnover. Be careful: making a mistake in these accounts can cause serious damage.

Finally, simulate different scenarios: realistic, pessimistic, and optimistic. Imagine possible difficulties and foresee solutions for hypothetical crises. This will enable you to be better prepared in the future in case some of these scenarios occur out of the blue.

Aaron Rodriguez offers strategies that can help a business grow

If a company wants to remain competitive in the market, it must constantly consider the development of growth strategies, not only to improve sales, market share, profit or the size of the organization but also to survive competitive attacks, thanks to the economies of scale and the experience effects it offers. Aaron Rodriguez, an expert in business optimization, provides a series of strategies that help a business grow.

To date, different basic growth and expansion strategies can be distinguished for a retail distribution company. Market penetration strategy, for example, is the exploitation of the same commercial format in the same market, using the same products or slightly altered products. Internationalization strategy, on the other hand, is opening up to other geographic markets with the same commercial format. Vertical integration strategy is the extension of the company’s activities to wholesale and production activities. Then there is the diversification strategy—entry into other commercial formats and into sectors that support the commercial activity.

Rodriguez says, “Growth strategies can be through internal or organic growth or external growth. The choice of one or the other will depend on various factors, such as the stage of the life cycle of the business formula, market saturation, the level of competition, the need or not for rapid growth, the existence or not of potential external partners, the level of resources and capabilities of the company, and so on.”

The internal or organic growth consists of carrying out the growth strategy through the creation of new establishments, new production plants, new representative offices, of the same company, perfectly controlling the expansion, and making sure that the whole entity meets the objectives. “This strategy can also be developed through the creation of a new commercial formula through a subsidiary with the same or new brands. The internal growth strategy has been the norm in most business development processes, which is why it is known as natural growth,” Rodriguez explains.

There are different benefits that can be taken advantage of based on this. First, it facilitates the optimization of locations and commercial distribution. Gradual growth in resources, making financing more convenient and optimizing the management process. It allows the acquisition of the latest technology, especially when it comes to capital goods. Many companies decide to grow under this scheme, but increasingly, given the business concentration processes we are experiencing, the trend is towards non-organic growth.

Many people today have not heard of blue ocean strategies. This is a recent theory developed by W. Chan Kim and Renne Mauborgne, which supports the thesis of the Resources and Capabilities Theory. This theory argues that it is necessary to set aside destructive competition between companies if we want to be a winner in the future, broadening market horizons and generating value through innovation. A simile is used for this: red oceans and blue oceans.

In red oceans, the boundaries of industries are perfectly defined and accepted as they are (reminiscent of Porter’s theory). Moreover, the rules of the competitive game are known to all and, therefore, in this world, companies try to outperform rivals by gradually gaining market share. As more competitors appear, the chances of profit and growth diminish, products become standardized (undifferentiated) and competition becomes bloody (red).

Blue oceans, on the other hand, are characterized by the creation of markets in areas that are currently untapped, creating opportunities for profitable and sustained long-term growth. There are blue oceans that have nothing to do with current industries, although most emerge from red oceans as the boundaries of existing businesses expand.

When these oceans appear, competition becomes irrelevant as the rules of the game are waiting to be set. As an example, we can mention again the case of Cirque du Soleil, something that at first glance few would consider a good idea to set up because of the decline of the circus, and yet they have reached over 60 million people. If the circus industry had been analyzed based on Porter’s criteria, the sector would not be profitable and it would not be easy to develop successful competitive advantages.