Service innovation trumps cost containment

In findings that may resonate with some financial planning firms, new research undertaken by American Express has confirmed that service innovation and delivery trumps cost containment in tough times. 

According to the American Express research analysis, a 'tale of two profit lines’ has emerged, with companies that improved their product and service offerings reaping rewards while those more focused on cost-containment were more likely to report a decline in profits over the past 12 months. 

The American Express findings were based on a nationwide survey of more than 1000 small business owners which found that almost three-in-four businesses (73 per cent) had taken actions to future-proof their operations in the face of sustained economic uncertainty. 

Commenting on the research, American Express head of small business services Jason Fryer said small business owners were taking steps to safeguard their business and ensure longevity but they seemed to fall into two camps - some focused on customer retention and growth with others more concerned with cost-containment. 

He said the two different approaches yielded significantly different results, with nearly a quarter of small businesses surveyed that were improving their product or service offering were also increasing their profits in the last year. Similarly, 57 per cent of small businesses that ramped up marketing activity also enjoyed higher profits. 

By comparison, 40 per cent of the businesses that reduced expenditure actually saw a reduction in profit, with more than a quarter (26 per cent) expecting the trend to continue next year. 

The research also found that businesses established for more than five years were more inclined to resort to safer internal methods of future-proofing - including reducing expenditure - than their younger counterparts.