Proactive and Reactive Business Strategies- Which is Better?

Every business model needs a plan of action that defines how a business should handle particular situations, from system malfunctions to customer complaints. Choosing the appropriate strategies determines how well an organization can detect and mitigate risks.

Companies should determine if a proactive or reactive approach best fits their operations, customer needs, and workflow. While both methods have their advantages, there are some significant downsides that management should consider.

What Does it Mean to be Reactive?

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In terms of business strategy, being reactive means to respond to an incident through audits and evaluations to discover the cause of the problem. This approach is completely dependent on the event and can only begin once an issue occurs.

To successfully implement reactive strategies, a business needs to quickly-

  • Identify their customers
  • Define their brand and mission statement
  • Determine how to appropriately respond to the incident

By defining these elements, management can promptly address the issue, avoiding any lasting repercussions from unaddressed concerns.

While reactive strategies save companies preparation time, it poses mitigation risks, as businesses are only able to respond to threats after they've already experienced them.

For example, a new retailer is unaware of their busy seasons and experiences a complete stockout of children's jeans during August. While they now know to increase stock levels for next August, they still missed out on potential sales from being unable to anticipate the surge in demand.

What Does it Mean to be Proactive?

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On the other hand, the proactive approach uses research and preparation to mitigate risks before they occur. This enables businesses to control a situation rather than relying on reaction, which often proves to be inadequate as it allows incidents to happen and wait for a response.

In order to successfully execute a proactive strategy, companies must-

  • Identify potential issues and concerns
  • Create multiple plans of action beforehand
  • Determine the best times to execute the plan

The main differences between a proactive and reactive approach are preparation and accountability. Being proactive requires extensive preparation to anticipate and address emerging events before they occur, taking full accountability to avoid any serious repercussions. Meanwhile, the reactive method does not spend any time preparing for potential issues but instead waits for issues to occur before creating a plan of action.

For example, a reactive marketing team would begin planning a campaign after noticing a surge in traffic and sales. However, by the time the promotion is created and launched, the peak of demand may have already passed.

A proactive marketing team would have monitored past and real-time data, enabling them to detect this emerging trend and launch a targeted campaign ahead of time. This gives companies a competitive edge and the ability to capitalize on customer data.

Another primary element of proactive strategies is quality control. While reactive tactics rely on damage control, being proactive enables organizations to assess and contain a situation before an incident occurs.
Therefore, businesses should consider how being proactive can improve their responsiveness and overall performance.

Tips for Being Proactive

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Although being proactive gives companies a significant advantage over reactive businesses, it can require a lot of time and effort to develop an effective plan. Management should consider-

  • Investing in Data Analytics
Access to insights, such as customer preferences, needs, and areas of concern, gives businesses the ability to analyze and interpret data ahead of time. With data analytics, management can detect patterns and emerging trends, enabling them to create a data-based plan to prevent potential issues.

With management software, such as inventory, point-of-sale (POS), and forecasting systems, organizations can store, analyze, and utilize large volumes of data. This enables teams to improve customer service, operational efficiency, and response time.

  • Creating Open Communication
Success relies heavily on how well a company can communicate with their employees, customers, and stakeholders. If the organization is experiencing a service failure, management needs to be able to immediately alert staff and clients, rather than leaving them to wonder why an operation or product is not functioning.

Businesses should be able to contact customers through various channels, such as email, text, and social media. This enables management to inform loyal clients of the problem's status and how they plan to resolve it. Otherwise, consumers may grow frustrated and confused as to why a brand refuses to address the issue.

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  • Resolving Issues Immediately
Simply reaching out to customers isn't enough if a business is unable to resolve the issue. Companies should have a clear estimate of when the matter should be fully resolved, and operation will return to normal.

This process should not take long, as the more time it takes to address an issue, the more likely customers are to take their patronage elsewhere.

  • Training Employees
Without proper training, employees are unable to identify and mitigate issues before they create a larger problem. Companies should hold training sessions during employee onboarding and whenever new technology is implemented to teach workers how to handle specific scenarios to avoid negative consequences.

For example, employees should know their company's return, refund, and customer interaction procedures to streamline transactions and inform customers of their policies. This avoids confusion regarding returning products and handling complaints.

Companies must determine whether they should take a proactive or reactive approach when it comes to launching business strategies and handling incidents. While both have their advantages, management should consider how the proactive method enables better control over situations.