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Rise or Fall: A two-tier crisis strategy (Part 1)

Many business decision-makers today are facing the big question: what should we do now? The market had only just recovered from an international crisis 12 years ago, only to be truly tested by a pandemic that is now pushing the skills of modern businesspeople to their limits, and this is now being joined, nicely and not so slowly, by a serious, war-induced inflation/recession. The biggest problem is that the traditionally reliable middle-class consumers have suffered the biggest losses, and the trend is set to get worse in the years ahead. In this situation, successful companies need drastic, new solutions if they are to survive or go under. One successful response to this situation is the so-called “two-tier business strategy”.

Tough competition

The “two-tier business strategy” is, in fact, a reinterpretation of an existing business model that was successful, usually in the pre-pandemic period. But this is not a simple “facelift”, but a reduction in the price of a product or service that has traditionally provided a high-quality solution for the middle class, while maintaining as much quality as possible, and the building of a new, more knowledge-intense, premium direction in parallel with the core business direction. In other words, the business is moving in two directions, usually separate in terms of identity, but in any case, completely independent in terms of added value and knowledge. It is easy to imagine or formulate in this way, but it is one of the most complex and difficult areas of strategic consulting. In addition, there are very high demands on the company that wants to develop if we want to succeed at the end of the process. First of all, it must have real knowledge, and in most cases unique knowledge, of its own profession and its own economic sector. Moreover, this unique expertise must be unique not only locally, but also at least regionally, precisely because of the tightening market environment. Since the second level of the strategy is always aimed at the premium consumer, the profitability of the business is much higher, but there are serious quantitative limits if one can only expand locally. A further requirement is that the company must be among the elite in its own market in terms of quality in the core business direction, since it will be able to offer recommendations and experience for the new, higher direction from there. Thus, if the knowledge and quality of the core are questionable, the reference will be useless, so the second level starts with zero background, which will seriously prolong the process. A third important expectation is already placed on the business decision-makers themselves. They must want to improve. As they are usually the owners and managers of a successful company, this is not so easy to present, as in most cases, they become complacent in the shadow of success and often realise too late that the market dictates the pace. Most managers stop at the point where the market is not going, and this is a natural phenomenon. But with this mindset, you should not go to the second level, because then you will fail.

Serious examples, serious successes

The two-tier business strategies have been in production since 2020, so we are still very early in the process, and successes can only be objectively assessed later. However, we are already seeing solutions and market players that have taken the first steps in a very effective and good way. One of these is TRUSTED/ENDORIENCE, who have been known and recognised as a boutique, quality company in their own market for more than a decade. Traditionally focused on the creation of POS devices and POS design environments, the company has landed in the mid-top end of the market in recent years, mainly thanks to its specialised expertise, which in this field means that they do not compete in tenders for supplies solely on price – although this remains a very important aspect – but clients are also willing to pay premiums for their quality work. However, on the demand side, expectations and needs are increasing, and although we are talking about a crisis, customers are willing to pay for it. For the company, which originally started out as EKI Creative, the strategic shift was clear, focusing first on developing a new premium consultancy direction and then on modernising the “core business” brand elements, which clearly express what they really offer to their partners. The new brand name for the core business is TRUSTED, as this is the most experienced brand in the design-build-manage sector, and is the most trusted brand that firms can bring to partners. The premium direction, ENDORIENCE, while leaving the concrete work to the execution, deals strategically with the design of office environments and retail spaces so that the client can present a premium environment perfectly suited to the partner’s target group. The first steps have been taken, and the first effects are very positive, which can be measured in TRUSTED’s significantly increased revenues and market presence. It is also interesting to note that many of the owners of companies that have boldly adopted the two-tier strategy are young managers in their early thirties who are very dynamic. The case of TRUSTED/ENDORIENCE is no different, and it is a particularly good example of how markets are indeed being redistributed.