PYMNTS asked business leaders for their take on how to plan for the rest of 2023 and what they are telling their teams to focus on. Brad Wiskirchen, GM and SVP of Kount, an Equifax Company, says businesses need to focus on finding the customers who are continuing to spend despite the lackluster economy.
Some industries are seeing a slowdown in sales, but overall, consumer activity is on the rise. U.S. consumer spending went up 1.8% in January — the highest increase since March 2021.
The influx in spending came as wages and salaries shot up 0.9%, with personal income increasing by 0.6%. While this is good news, we shouldn’t be overly optimistic.
Because as recently as Q4 2022, U.S. household debt was rising at the fastest pace we’ve seen since 2008. American consumers carry heavier credit card, mortgage and auto loan balances than before the pandemic. And payment delinquencies are rising because consumers are borrowing more with credit cards as inflation-driven costs increase.
What this means is that today’s consumers aren’t as financially sound as they once were.
So even though there are signs of economic improvements, businesses need to stay vigilant for the remainder of the year. No cutting corners for potential revenue or taking on more risk than necessary.
One of the foundational principles of business is understanding that not everyone is an ideal customer. Universal acceptance introduces unnecessary risk. It’s more important than ever before to make sure you know who you are doing business with.
I recommend businesses invest time and resources into a quality risk management strategy. And big data can help.
Set key performance indicators around variables such as propensity to spend, shopping habits and other relevant demographics. And then use data to make informed, accurate decisions about customers — with the greatest return on investment and lowest risk.
Once bad customers have been weeded out, look for ways to increase revenue from good customers. This is another business basic that has become increasingly important during these difficult times.
Because investors are pulling back, they are no longer asking, “how fast are you growing?” Instead, they are asking, “how safe is your growth?”
If investment funds are dwindling, businesses are more dependent on the revenue they can generate. Again, the temptation is to broaden the sphere of influence. However, the secret to success is doing more business with a smaller, safer audience.
In times of economic slowdown, it is easy to neglect fundamentals for fear of compressing margins or growth. But instead of looking to expand in new, aggressive ways, go back to the basics. If you do, you’ll be well-positioned to grow exponentially as the market softens.