Did you know that the biggest businesses in the world are incredibly cheap to run? At least, in ratio with their size and level of success that they have achieved on the market. Apple, for instance, has an incredible business model. The average basic price of producing an iPhone is ten dollars. Add on marketing costs, sales, and shipment and you still wouldn’t reach the massive price that they charge for the product. You might just about get to the halfway point of three hundred dollars. That’s an incredible ROI, and it’s not the only business that rakes in theses types of profit levels. A lot of them do, and they have more secrets than just keeping production costs low. Although, it is worth beginning this analysis by figuring out how those production costs are so small in the first place. To find out we need to head over to China.
International Outsourcing
Do you know where the iphone that is currently in your pocket was made? It was in China and arguably under worst conditions than you would like to imagine. International outsourcing is quite common in the business world. Almost every major company uses this tactic to keep costs low. We know this because over the years there have been several major controversies about this process. From the iphones made by child labor in China to the clothes Primark makes in sweatshops. Like it or not, this is one of the methods bigger businesses use to keep costs low.
Production costs are significantly cheaper in countries like China due to limited laws on the use of labor. Child labor is a major issue over there, and level of pay for workers is low. Ethically, this might seem sketchy. Financially, however, it’s a winning situation for the business owner.
You should understand though that this isn’t the only type of outsourcing. Indeed, many businesses use outsourcing companies that are down the road rather than half a world away. In this situation, they are aiming to cut costs without reducing their moral standards. An example of this is IT outsourcing. An in-house IT team is always going to be an expense that business owners will struggle with. Businesses rely on IT to function, and that puts experts in high demand. Due to this, it’s cheaper to outsource the issue to an IT support company. They can setup the network and provide 24/7 coverage, in case there are any issues. Top companies outsource any area of the business that they believe is too expensive.
Cheap Marketing
Hollywood producers will spend double the amount of the production budget on a film on marketing and promotion. Crazy yet true and this is why for a blockbuster to be financially successful these days, it has to get close to the billion mark. Ideally, an expensive film will jump right over it into the top ten territories. However, Hollywood works on a weird business model that isn’t effective in other industries. In fact, this type of business model could be quite damaging to other businesses, and that’s why they don’t use it.
Instead, big companies on the market today look for cheap forms of marketing that have massive reach. Usually, they focus on online output and viral content. Technically, you could market your business online at no cost whatsoever. You can do this because by posting on a social network, you’re marketing your business. Albeit most likely in a way that isn’t that effective. Big businesses don’t market their companies for free online, but they do promote at excellent value for money. Using SEO services with one fixed cost, they can rise to the top of the SERPs. Once your business is at the top of the SERPs, there’s very little that can go wrong. Customers will click, and if the website is attractive, a large majority will buy. Arguably this is where most of the marketing budget is spent by big companies. They work to make their business website as attractive as possible.
Others use PPC marketing. Through PPC, you only pay based on how many clicks you receive. This is a great way to keep those marketing costs under control. However, if you use this service, you must remember that you’re paying for clicks, not for sales. An estimated thirty percent of consumers will click on inorganic search results. That doesn’t mean they’ll buy though.
Clever Partnerships
Let’s take a trip back to Hollywood and take a peek into one of the boardrooms of the big studios. They’re pitching a new idea for a sequel to an existing franchise. Rather than plot, you’ll notice discussions are happening about merchandise deals. This is another way blockbusters tend to make money. Deals on merchandise and promotion are made before the film is even in production. Some movies are profitable before they even hit cinema screens.
Hollywood isn’t the only industry where this happens. There are plenty of businesses that reduce costs with mutually beneficial partnerships. Or, joint promotional ideas. One example of big business that does this is the fast food market. They regularly have products that tie into merchandise campaigns with entertainment media. Car companies do this as well, and small businesses can follow suit. If you have a mechanic company, you can promote a tyre business. They can promote your company as well. You provide the service while they give customers parts they need.
Higher Levels Of Efficiency
Finally, business owners are constantly looking for ways to make their model more efficient. Doing this, they can reduce expensive overheads and deliver big benefits to consumers. A faster service at a lower price is exactly what customers want. By increasing efficiency, big businesses match this goal. One of the ways that they do this is by reducing the amount of waste in the business model. Time wastage is a massive problem for big business. When you waste time in your company, you might lose a couple of dollars each time. They could lose thousands in minutes. Something as simple as training up staff could lead to lower amounts of time being wasted during the working day.
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