Last week when working with a hospitality client the rising cost of living and impact on many businesses that all fall into the discretionary income market came up for discussion.
With companies like Booktopia, Angus and Robertson, Carls Junior etc going out of business because peoples spending has reduced or no longer exists.
ASIC’s latest insolvency data for the nine-month period from 1 July 2023 to 31 March 2024, released April 2024, shows an increase in the number of Australian companies failing.
During the period, 7,742 companies entered external administration, a 36.2% increase on the previous corresponding nine-month period ending 31 March 2023.
Out of these external administrations, construction (2,142), accommodation and food services industries (1,174) represented the greatest number of company failures, accounting for nearly 27.7% and 15.2% respectively.
The data also revealed restructuring (878) and court liquidation appointments (1,593) increased by 294.6% and 218.8% respectively, when compared to the previous corresponding period. These numbers are higher than the numbers recorded for the full year period ending 30 June 2023, which were 447 and 1,081, respectively.
At the time these figures were published with only one quarter remaining in the financial year, it was expected that the number of companies entering external administration by 30 June 2024 will exceed 10,000, a level not seen since the 2012–2013 financial year. Notably, the ratio of companies entering external administration compared to the number of registered companies (expected to be somewhere between 0.3% to 0.33% for the full year) is still less than 2012–2013 levels (0.53%), as over the same period the number of companies registered in Australia has increased from just over 2 million to 3.3 million.
Why Is Discretionary Income Important in Relation to Customer Loyalty?
Discretionary income is a key factor in customer loyalty, as it helps businesses understand how much money their customers have available to them for discretionary spending. By understanding discretionary income, businesses can better target their offerings to meet the needs of their customers. This can help businesses increase customer loyalty and create a more positive customer experience.
For example, McDonalds is looking at their costings and how they can pass this on to their customers.
I attended a function last Sunday which a lot of dignatories like federal MP’s, local MP’s and Council members attended in Tasmania. There was 30 people who attended the function in a local hotel which I had not visited before, so I was interested to see what the experience would be like.
As I walked in I noticed the hotel seated approximately 150 people and that there was another large group dining as well. The sitting was tight, you couldn’t move between the tables comfortably once you were seated.
The service was OK, nothing to rave about but it got worse when we received our meals, as they were cold.
The problem for this hotel was that there were key influencers dining and they just didn’t get it right.
It is so tight at the moment that any opportunity a business has to stand out must be delivered on. Every moment is critical, you cannot afford to get this wrong. People have choices and they are being very careful with their spending.
My question is, did they have a meeting to plan for this function? Could they handle the amount of business in one sitting?
In this case, when faced with the opportunity of delivering to a group of influencers, their mindset should have been in the realm of – we are going to wow their socks off. We want these people to recommend us to others and to want to come back themselves.
Based on my experience I wouldn’t recommend them or return and I am sure I am not the only person in the group that feels this way. Sadly, a massive lost opportunity for this business.
At the end of the day, it’s all about showing your customers that you care. Investing in discretionary income and customer loyalty is a great way to demonstrate that you value their business and are willing to go the extra mile to ensure they have a positive experience.
For more information on discretionary income and what you need to know read my previous article on discretionary income and customer loyalty.
Need more information? Have a look through my previous Blogs, located on The Loyalty Zone website or contact me, I look forward to hearing from you.
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Warm Regards
Craig Cherry