- Posted by tonyw
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It’s a truism. Some horses really do succeed on some courses more than others. And so too in life. And, believe it or not, this applies equally in business. Yet, as business people we often overlook this fact during the day to day running of our firms. And the truth is, if we do, we fail to optimise our sales and profit potential.
Here’s a brief case study to illustrate …
Brown & Co is a firm of heating engineers. They’ve been servicing boilers for 20 years and enjoy a good reputation for reliability and economy. As a result, they retain a high proportion of their customers’ year on year and maintain a steady business. Then one day they noticed a slackening off in customer calls. It was barely noticeable at first but it became more and more evident. And their business began to suffer.
The reason? They had started to lose customers to a rival firm of heating engineers who had spotted the opportunity of offering annual boiler maintenance. This kind of contract offers annual checks and repairs with a low-cost ‘anytime’ call-out service as part of the deal.
A service Brown & Co offered too, but not in the form of an annually-renewing contract. And here’s the point. The new firm (let’s call them Green & Co) made this offer only to households they judged would buy into such a contract on a renewable basis. The sort of households who wanted the ‘peace of mind’ such contracts offer and who could afford to pay the premium.
Green & Co had targeted homeowners of above average disposable income in selected leafier, suburban areas of the local city. These householders represented the cream of the heating services market locally, and many of those who chose to take Green & Co’s offer had switched from Brown & Co, effectively losing them these valuable customers for at least 12 months. Meanwhile, Green & Co were building a highly profitable customer base and business.
Situations like this are far from uncommon, particularly in the small business sector. Brown & Co could have made this service available had they realised and recognised that customer needs can vary by customer types. Offering all customers the same service failed to optimise their sales and profitability and permitted a competitor to steal some of their more profitable clients.
As I mentioned previously, this is a simple but surprisingly common mistake many companies make. As a discipline, this sort of consideration best fits into what might be termed ‘business planning’. That said, among SMEs this is a fairly rare process. It’s often tricky for an owner or MD of a small firm to find a balance between allowing time for managing the business and providing the time for leading it. And leading a company means giving thought to every opportunity for profitable growth available.
So, someone has to strike that balance otherwise a company’s real potential will be compromised. If the appointed leader can’t do it, maybe it’s time to find a new one. It’s horses for courses in that department too!
Tony Wightman is Director of Wellwood Consulting, advisers in business and marketing planning to small and medium size enterprises in London and the South East.