Revenue growth can make up for many mistakes. Focus your efforts on where you can add the greatest value for your existing and future customers. Customers and employees don’t want to board a sinking ship. If you do cut costs, be careful about your message to employees and customers. When revenue falls, it is natural to think about cutting costs. When you give up on attracting customers, cutting costs seems like a good idea. When you cut costs without considering the impact on employees, customers, and overall loyalty, you make a conscious decision to follow a short-term path with poor long-term results. The tough lesson here is you cannot save your way to prosperity. Forget about a wait… the place was almost empty at 7:30 at night. But, they’re all about cost cutting.” After a few bad experiences, the group went from one of my favorite spots to “I’ll never dine there again.” I walked past a location that used to have a long wait in the evenings. When I raised the issue to a manager waiter, he said “ I know. Clearly, they concluded that they’d improve financial performance by reducing portion size and raising prices. I just hope that the chicken was still chicken. The restaurant started cutting staffing, which made sense. Over the years, you’d see shorter waits during busy periods. I’ve eaten at their restaurants more times than I care to admit. When they first opened, they were the leading brand. Near my home, there is a group of Thai restaurants. After decades as a loyal guest in other programs, I have switched to Marriott. I earned a $200 bonus last month because I cut our costs.” Marriott on the other hand makes a decision to focus on loyalty and engagement over costs. The concierge said to me quietly, “I get a bonus if I can cut our costs. That is how she gets measured and rewarded.Īt another hotel brand, guests in the concierge lounge were asking about the empty trays of what we suspected were appetizers during happy hour. She tries to persuade the chef to create exciting snacks to improve guest satisfaction. In the concierge lounge at a Marriott, the concierge said she gets a bonus for each letter they receive from satisfied guests. When you can save money without adversely impacting the customer, you provide improved value all around.Īs someone who travels quite a bit, I noticed how two hotel chains treat their elite guests. In most cases, they reduce costs while maintaining the same provider, performing the same services. They strive to obtain the “right” price for the products or services you are buying based upon their research. Companies like Expense To Profit and Expense Reduction Analysts work to cut costs in areas where you have significant savings. If you can reduce your costs and either maintain or improve quality, that’s a no-brainer. Just be careful to not make some of the mistakes I’ve outlined as the Good, the Bad, and the Ugly of Cost Cutting. Your cost cutting might be driven by a desire to price your products or services more competitively, to improve financial performance, or to better serve your customer. But, each dollar you save goes directly to the bottom line.
Those who specialize in expense reduction would accurately argue that each dollar you earn in sales contributes a small percentage to profit.