The saying ‘revenue is vanity, profit is sanity’ is especially true in a slowing economy. At the same time, there is a huge opportunity to reassess the value of the products and services your organisation offers. The tips that follow are designed to spark your thinking about how best to lock in customers for the long-term.
- Research customers’ changing needs. Avoid complacency. ‘Ask, ‘do’, ‘tell’ are the key words. Find out what you are doing right and what you need to improve. Do something about it. Tell customers what you have done.
- Profile the customers for whom your product is best suited. Group and prioritise customers by their needs. Consciously position your products in the market according to your best customers’ most critical needs.
- Take exceptional care of your customers. If customers are happy they will keep coming back. Remember lack of communication is the death knell for most supplier-customer relationships.
- Lock customers into your products. Identify and concentrate your marketing activities on customers for whom the cost of switching to an alternative would be too high. Consider designing products and services that inherently possess high switching costs. Make the customer aware of the costs faced if they went elsewhere – costs such as retraining, write-off of investment, knowledge loss, carrying of dual inventory etc.
- Say ‘no’ to orders that don’t make business sense. Despite your temptation to focus on revenue and volume, your responsibility is to take courage and refuse orders that do not preserve your margins. In a downturn you want static and reasonable profits, not lots of volume with half the profit. Half the profits never works over the long haul.
- Look for recurring revenue. Consumables, disposables, replacement and short life products or maintenance and update services all present opportunities for recurring revenue. Recurring revenue can provide a more significant opportunity than repeat revenue alone. It requires less sales effort, can generate higher margins and is much more stable in a downturn than is repeat revenue.
- Make your online offering an urgent priority. If you do not have an e-commerce/online offer then ramp up your efforts. Do not try to do this by yourself if you don’t have the experience or expertise. Seek help. Professionalism matters.
- Build new services. Many services that contribute to recurring revenue can be identified during a downturn. For example, repair and maintenance services that go beyond the warranty period are hard for customers to put off and are paid for as and when needed. Payments are relatively small and the results are generally immediate.
The following topic in our Business Basics Series is Focus on the customer (Part 2).