75% of UK SMEs set to pivot in response to changing consumer expectations caused by rising cost of living
New research from American Express reveals that three-quarters (75%) of small and medium-sized businesses (SMEs) are pivoting again in response to shifting consumer expectations brought on by the challenging economic environment by strengthening their customer relations and services.
As a result of the rising cost of living pressures, six in 10 (60%) of UK SMEs say that consumer expectations are increasing, with over half (52%) stating customers are increasingly driven by price, and over two-thirds (68%) reporting that customers are looking for ways to cut back on spending.
The research, conducted by Opinium on behalf of American Express and Small Business Saturday, found that SMEs are proving agile in response to this challenge, most notably by diversifying their customer offer (54%), improving customer communication (37%), and providing additional services (30%). Around a quarter (23%) plan to launch more special offers. Furthermore, exactly half of SMEs say they are more focused on broadening their customer base rather than increasing spending from existing customers.
Aside from the impact on their customers, SMEs are also mindful of the ongoing effect of rising prices on their own operations. More than half (52%) state that the rising costs of goods, services and energy present the biggest challenge to the running of the business in the next six months. Over a quarter (28%) are looking at additional ways to improve their cashflow as a result.
However, overall, SMEs are broadly confident about future prospects for their business. Three-fifths (61%) state that they expect a growth in sales over the next 12 months and two-thirds (66%) describe their business as being in ‘good shape’, highlighting the resilience and optimism that these businesses are renowned for.
Amanda Salt, Vice President for UK SME Sales, Global Commercial Services UK at American Express, said: “Our research highlights the resourcefulness and flexibility that SMEs are rightly known for. With cost pressures increasingly front of mind, they are evolving their approach in response to heightened expectations from their customers. Those businesses that scrutinise their operation, proactively take action to adapt to current challenges, in tandem with going the extra mile for their customers, will secure a competitive advantage.”
Michelle Ovens, Director of Small Business Saturday UK, added: “This research underlines just how challenging things still are out there for small businesses. After pivoting with incredible speed and entrepreneurialism during the Covid-19 pandemic, they are now adapting again to a new set of circumstances. It is great to see such dynamism and positivity from business owners.
“But with many small firms having little in reserve following the pandemic, we need to support them now more than ever. People are understandably looking closely at where they spend every penny, but they also have a wider power with that spend. Shopping small and locally not only offers greater value but also represents a significant investment in our communities.”