Or haven't you asked them? 

Customer surveys can tell you a lot.  In short, what you need to improve to gain and retain more customers.   And you will know that existing customers are far more profitable than new customers.

As I commented in a recent blog only a little while ago we completed a second survey for a client who, for convenience, we'll call Joe Blogg's Widgets Pty Ltd.  The first survey was undertaken five years ago.  It is the lesson from the customers that I would like to reinforce.

The survey results show some significant improvements in customer's perceptions of Joe Blogg's Widgets.

In the earlier survey there was little doubt that Joe Blogg's Widgets was meeting customer's needs and that the company had an excellent reputation amongst its client base.  However there were opportunities for improvement, particularly in relation to promptness in quotations, timeliness and the general appearance of the premises.  All are practical, realistic steps for the business to take.

As before, clients have identified the key benefits they seek when using a business such as Joe Blogg's Widgets are quality, service, promptness and reliability.  I doubt you would argue with any of those.

But the most significant change is seen in the reasons customers gave for using Joe Blogg's Widgets.

The overwhelming rationale customers now gave for using the company is the long term relationship between Joe Blogg's Widgets and the customer.  These customers have been using Joe Blogg's Widgets for a long time and, importantly, have no intention of going elsewhere.  Price is not the issue.

Reliability and the ‘relationship' developed between business and customer seems to be the strongest factor.  Relationships are a factor beyond price, quality and delivery.

This suggests that Joe Blogg's Widgets is consistently delivering value in the customer's eyes.   That value is not just seen in the quality of the work done and ability to meet customer's specific requirements.  It is also seen in the attitude of the staff. Continual references were made to the helpfulness and friendliness of staff members.

In a recent newsletter to our subscribers we argued that it is the "consistent quality of the relationship" that determines your business's the brand.  That is what Joe Blogg's Widgets has developed.  And it keeps their customers coming back again and again, regardless of price.

What do your customers tell you in your surveys?

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

Or a sales tool to be used for your advantage?

So often when responding to a request for quotation or tender the detail the customer is asking for becomes a bureaucratic burden, particularly when the customer is a government agency.  So much unnecessary detail.  The form required, and it is so often a form, just seems to go on and on, requesting unnecessary and irrelevant information.

It all becomes a pain in the you know whatsit!  It is tempting to rush through the information requested, providing the minimum requested to get to the real requirement, which of course is your price.  And as a result, because you feel you have to comply, and it's a burden, you may well respond badly.  

Responding badly of course doesn't help your case.

There is another way of looking at this, a way that may help your chances of winning considerably.  

Take a step back from the quotation or tender.  What is stopping potential customers from buying from you in a non-tender situation?  Customers won't buy when they have possible objections in their mind, or when they feel there may be some risk in the deal. 

You need to overcome the objections, take away the risk and give them good reasons to choose you.

So what could some of those objections be?

  • You haven't done this type/size of job before?
  • Can anybody actually verify what you claim?
  • How do they know you know how to do the job?
  • Will you be able to finish the job on time?
On the other hand they will probably feel some comfort if the product or service you provide has worked for others.  
  • How have others found your service?
  • Would anyone be prepared to recommend you?
  • Can anyone reassure the buyer as to your capability?
The customer doesn't want to look a fool if something goes wrong.  So where are the risks?
  • Do you have systems and procedures?
  • Can you properly plan projects?
  • How do you overcome the unexpected?
In a world of choice, why should the customer choose you?  What makes you different?  For example:
  • Have you demonstrated particular and useful experience and expertise
  • Do you do things differently - innovate to improve your efficiency and effectiveness?

One way or another, you probably go through this process of reassuring the customer when making a sale.  It may be verbally, giving the prospective customer examples of the work you have done, the successes you have had, the customers who will give you a reference.  Or you may have a company profile which includes this sort of information.

Whichever way, you seek to make your potential customer as comfortable as possible in dealing with you.  A decision in your favour becomes a comfortable and logical next step.

Now step back to look at that bureaucratic burden you have been dealing with.  In most cases all that bureaucratic detail you have been cursing is doing much the same thing.  It is aimed at removing objections, reducing risk and enabling the customer to feel comfortable with you.

Turning that pain in the whatsit into a sales tool for you will not only give you a completely different perspective, it will also considerably improve your success rate.

If you would like to discuss this 'about face', please This email address is being protected from spambots. You need JavaScript enabled to view it.

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

 

You know how sometimes two events which seem to be independent come together to confirm and reinforce each other, and in doing so provide a valuable lesson.

Recently Jo Reiter of creative agency Adzu (www.adzu.com.au) delivered a seminar on branding.   Jo is an award winning businesswoman in Darwin, Australia.  Her thesis was that a brand is far more than the look and feel of a logo and its style, that a brand is “an identifiable entity that makes specific promises on value”.  In essence, the value the business actually delivers becomes the brand.  The logo doesn’t deliver; the business, its people, processes and systems deliver.  And that is what becomes remembered in the customer’s minds.

There was much more to her presentation than this, and we discuss more about the implications of the relationship between brands, value and how to esablish this in our next newsletter .

The second event, which reinforced this thesis, came about as I was undertaking a customer survey for a client in preparation for a strategic business planning session.  Understanding how customers perceive the company is a key input to any business planning activity.  After all, customers have fundamental role in providing the income stream to the business.

Five years ago I had undertaken a similar exercise for this business, so we had some base data to see what, if anything had changed.

And there had been change.  The sample was only small, not statistically significant but enough to give a good understanding of perceptions of the business.  The changes were seen in a number of areas:

  • Customer’s perceptions of the company’s delivery against a range of service factors showed a 20%   improvement over its performance five years ago; and
  • Unlike the earlier survey, customers were unable to benchmark my client against its competition either on service factors or to compare pricing.  Why?  Because they weren’t seeking competitive quotes or seeking to compare them in any way.

My client appears to have developed a very strong relationship with its clients based upon its performance, and the value its performance delivers.  The consistent message customers gave during the survey was about delivered value and the relationship which went with it.

Now that is branding.  And I’m sure Jo Reiter would agree.

If you would like to discuss the concept please contact me.

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It’s an old saying, and very true if you are in business.  It is even more relevant if you are in a professional service business where you cost your time, or in a service business where you charge out your staff’s time.

The key of course is to know how much time is actually being spent on a particular job so you know how much to invoice, or should have invoiced if it is a quoted job.
Staff can be very quick to get in their time sheets, because that is how they are often paid, but they can be less prompt, or accurate, in completing Job Cards for a particular job. 

And it is through the Job Card that you get paid by the customer. 

You may decide to write down a job and charge less than the actual time spent.  But that is a management decision.  You do need to know the starting point of time actually spent before you can properly make that decision.

The ‘time is money’ concept really comes into reality when you compare the time shown on the job cards to that of the timesheet against which staff are paid.  I call the comparison the utilisation rate and calculate it as a percentage.  For example if Joe Blow is showing 30 hours for the week against his Job Cards and you are paying him for 40 hours his ‘utilisation rate’ is 30 over 40 i.e. 75% 

Where did the missing 10 hours go?  Should they have been charged against a job or jobs?  If they weren’t, and they should have been, you can wave goodbye to some of the profit from that job, perhaps all the profit.

Waving goodbye to profits is of course a profit leak.  I find the Utilisation Rate a useful tool in looking for profit leaks in businesses, and where appropriate, set up clients with a template to calculate it on a regular basis.

If you would like to discuss the concept please contact me.

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective 

The earlier you 'breakeven', the more profitable you will be

When you read the article "So what is breakeven and why is it so important?" under Articles on this site you will understand the concept of breakeven, the relationship between fixed and variable costs, the amount of business you do, and in particular, the damage that discounting can do to your business.

There is a relationship between that article and the subject of our previous blog "Are you selling dead fish?"  Have you noticed that when writers discuss business matters they usually do in specific functional terms; for example in financial, marketing, HR or operational terms?  Rarely do they discuss the subject taking into account the relationship between the different functional areas of the business.

Of course you cannot do business without that relationship existing, which is why examination of your business processes can be so rewarding.  Business processes must be cross-functional to deliver to the customer.  But that is another subject, which we will examine at another time.  Prompt me if I don't get to it.

It was because of this relationship between functions that the breakeven article looked the financial impact of a marketing tactic in discounting.  As you saw, it's not a very nice picture.

Dead fish have much the same impact on breakeven.  The breakeven sum is about gross margins and the volume of sales.  So what do you think is likely to happen to your breakeven point if you dress your ‘customer value package' as dead fish, rather than something that solves a problem, and provides a benefit, something that meets the customer's specific need?

You guessed it - lower sales, and because you don't have a point of difference, lower margins because you will have to compete on price.

So to bring forward your breakeven point, leading to increased profits, you need to promote your product or service in terms of benefits in the customer's eyes, so that they can clearly see WIIFM (what's in it for me), and pay a price that reflects value to them and gives you a decent profit margin.

In our latest newsletter we discuss the need to be more specific about your customer profile in your target market.

Where to from here?

In my previous blog I mentioned I am interested in developing a product which will help you get your business moving again.  If your breakeven point is stretched out because you are not profitable then you have a profit leak ...... somewhere.

The product, a ‘diagnostic' tool will help you, with some assistance from me, identify where that profit leak might be and, importantly, what you might do about it.

So let me know your thoughts on what might be of interest to you.

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

One scribe I know talks about a business's products and service as "customer value packages".  Now that's a bit of a ponderous mouthful but it does send a message.

Imagine if you went into a restaurant and looked at the menu to find a meal described as: ‘Dead Fish, gutted, beheaded, cooked and laid to rest on a plate next to a pile of dead potatoes and a scoop of mixed vegetables.'  

Now that may exactly describe the offering but it certainly won't conjure an image of a mouth-watering meal in the customer's mind.  And what are the chances of it selling?  Instead, you'll find the following type of description: ‘Freshly caught barramundi fillet, sauteed in real butter and sprinkled with a dash of garden fresh dill with roasted almond slices. Served with a piping hot baked potato and a generous side of steamed tender fresh garden vegetables.'  Now that is much more likely to create an appetising image in our customer's minds eye and lead to an order.

So what is the message you give your customers in your Yellow Pages advertisements and other promotional material?  Is you ‘customer value package" dressed as a dead fish, a purely factual description of the features of your product or service?  Or is your message about the benefits those features provide, the emotions they provide or the problems it solves?  

I'm curious!

Do you feel at times that you are just running on the spot, going nowhere when you really feel you should be getting ahead with all the effort you're putting in?  What could be the cause?  

I'm interested in developing something that might start getting you moving again soThis email address is being protected from spambots. You need JavaScript enabled to view it.

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

And usually isn't!

19th March 2008

Let's face it. Most small businesses don't market their businesses and their products and services very well. In fact very often they don't market them at all. Many studies show that lack of marketing skills and knowledge is one of the major weaknesses of small businesses.

Why is it so? There are probably a couple of reasons for this: the background to the owners and managers; and a fear of being seen to "sell".

Many small businesses are started by people who are good at what they do, and that often means having a trade or a technical background. To become good at what they do they will have spent years gaining those skills. Is this you?

Whatever formal learning of those skills you may have done the formal training will have been supplemented by even more time of practical, on-the-job training, being guided by people with even more years of practical skills and knowledge.

So you get to set up and run your own business. And you win business based on your reputation. And this is good enough.... for awhile.

It is good enough while nothing changes in your market place. For it is when your market place changes that you may find you lack one essential ingredient for success in your business. And that essential ingredient is control.

Control over the sales you win and where those sales come from. Anybody in business will know that some sales are more profitable than others, and that growing your business will be more certain if you concentrate your time and money on the more profitable sales, rather than the less profitable sales

But without marketing you have no control. Businesses feel they must accept each sale that comes through the door, because they don't know where the next sale is coming from.

Many people are under the mistaken belief that all they have to do is have a good product or service and that is all they need to have a business. Unfortunately it is not as simple as that. If you don't have a good product or service, you won't exist for long. You also need to let people know your company exists.

And letting the people know you exist won't work unless they are the right people, the people who are likely to buy your product or service. Targeting the right people means you are beginning to develop a good marketing strategy. Marketing is absolutely everything you do in your business.

Accepting each sale that comes through the door not only means that part of your time and effort will inevitably be spent on jobs that are less profitable than others, but it can also lead you down the wrong path. A few jobs come in you accept them, even though they are not in your core competency, and next thing you find yourself being lead away from your area of expertise, into uncharted markets.

Uncharted markets may be much more competitive than markets based on your skills and expertise, and being more competitive, the competition is likely to be through price, and lower margins.

One definition of marketing suggests that "Marketing is selling the right product to the right people at the right time at the right place and at the right price." By the right price I mean a price that is profitable to you and of value to the customer.

And if you doubt the validity of that definition try substituting the word "wrong" in just any one spot that it say "right" and ask what that means for your business.

Get it "right" and you will have greater control over your business, and you'll also find you have developed a marketing strategy to do so!

What are your thoughts? Is this you? This email address is being protected from spambots. You need JavaScript enabled to view it. ag05.jpg

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

And why you should avoid him?

5th March, 2008 

Knowing who your customer is can be difficult.  So often when running a marketing workshop when I ask participants who their custome is I am told that is "everybody".  At which point I suggest it might be worth thinking about whether that is really true,

You see you can't be everything to everybody.  And that is why you should try and avoid making ‘everybody' your target market.  As someone said "I cannot give you the formula for success, but I can give you the formula for failure: which is: Try to please everybody."

When your market is everyone... your market is no one

We all have different needs, preferences and tastes.  And no matter what these are, we usually have different discretionary income to spend.  So even a superficial thought about your customers will suggest they might have differences.

And if there are differences there may be customers you can service better, who will be happier with your services, and may yield greater returns.  If this is so, you might be better of concentrating on customers like these, rather than those less easy to please, or who might yield poorer returns.

If your target market is ‘every body' then, depending on your business you will need to:

·         carry more stock to cater for a wider range of requirements;

·         Employ a broader range of skills to offer advice and expertise ‘across the board';

·         Advertise more widely through a greater range of media to get ‘every ‘body's attention;

·         Compete on price rather than a point of difference, and compete with a far wider range of competitors

Each of these is going to add to your costs or lower your margin.  If you are a small business, you will need a lot of ‘everybodies' to make up for the loss your gross profit margin.

Breakthroughs come in your business when you can position yourself in a unique way that's seen as extremely beneficial to a desirable target market.

Concentrate on those who have the problem you solve, and are ready, willing and able to buy, and willing to buy from you.  You need to narrow your marketing to those who can most afford it and are most anxious to buy.

Just think of your promotion from the customer's point of view.  They are more likely to be attracted to businesses that specialises in servicing customers just like themselves - "what's in it for me!"  So a promotional message that talks about them is more likely to attract their attention than a promotional message that targets nobody in particular.  That makes a more effective promotional message, one that is more likely to bring results.  Targeting the wrong audience is a sheer waste of your money.  And so is advertising without a target.

When you try to be everything to everybody... you end up being NOTHING to NOBODY!  Keep your message tightly targeted to "Some Body".   And avoid that person called ‘Every Body'.

What  are your thoughts?  Is this you? 

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

23rd February, 2008 

Is this you?  You concentrate on the job in hand, getting it right to make sure you make a profit, then move on to the next job.  That's all that is required to build a business, isn't it?  After all, there will always be a job on hand, and one to follow it. Life goes on.  Nothing much changes.

And I've known many businesses like that.  Just working away at what they do, often doing it well, but not paying any attention to the outside world at all.   And the funny thing is, that it is not just very small firms that act like this.  Many larger ones do so as well.

Perhaps it is a coincidence, but businesses such as these rarely seem to do any marketing, without realising the risk this places on the business.  They rely almost entirely on word-of-mouth and repeat business to sustain them.  Now there is nothing wrong with either:  word-of mouth is still the most effective form of promotion.  And repeat customers are the best ones to have.  You make far more from repeat customers than you do from new customers, a fact that has been proven over and over again.

But the idea of using either as a practical marketing strategy is the last thing on their mind.  Perhaps this is so because marketing smacks of selling.  And selling is ......  Well, the image that probably comes to their mind is that of a used car salesman, or real estate agent.  Both may be unfair images, but that is another question.

However, the question such small business people then ask is, "So what is the problem with their strategic lack of strategy?"  And I would answer that there are at least two problems. 

The first problem is one of lack of control over the future direction of your business.  Without a marketing strategy designed to achieve certain objectives you have absolutely no control over the future direction of your business.  You are completely dependent on what comes through the door.

And what comes through the door can lead you in another direction, which may suit at the time in terms of workload, but in reality be leading you down the wrong path.  This in fact happened to client of mine.  Last year they found themselves with a completely different product and customer mix than the previous year.  And the really scary thing was that this nearly lead them to make a decision to move out of their area of specialisation into a larger but very competitive market where they had no competitive advantages whatsoever. 

And without a competitive advantage they would have been forced to compete on price, not value, thereby leaking profits.

The second problem a lack of some practical marketing leads to is also a profit leak, but a profit leak in another form.  Without a doubt, taking whatever job comes through the door can lead to your business doing jobs that you are not as expert in as others, jobs where you may be less likely to complete the job within the costs allocated.  The dreaded cost overrun.

And a cost overrun reduces your profit margin.  If you don't think I'm right, try analysing the last x jobs for how well you come in on actual costs against budgeted or quoted costs.  The chances are you will find that the greatest variation will come in against the jobs outside your area of specialisation.

Typically small business owners take these jobs as they come up because they are not sure where the next job is coming from.  They see it as a form of protection, of risk reduction.

But would it not be better to reduce the risk by ensuring that the jobs you get are taking your business where you want it to go, and these jobs are the jobs where your can add the greatest value through your expertise, and profit accordingly.

And you can do this by adopting a simple and practical marketing strategy to get referrals and repeat business without becoming a ‘salesman'. 

How to develop and implement such a strategy?  Well, that sounds like a good subject for a future newsletter.

 What  are your thoughts?  Is this you?  This email address is being protected from spambots. You need JavaScript enabled to view it.

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

Or merely an impediment on the road ahead?

6th February, 2008

Sometimes perceptions may not be reality

Barriers are, well, barriers.  They are not immovable but shifting them can take some effort although they often feel impenetrable.  And an impediment, well that is more of an obstacle, and obstacles can be overcome.

Have you ever been in the situation where you know where you want to go, what you want to do with your business, but there seems to be an impenetrable barrier in your path, an immovable object blocking your progress.

And like a burr in your shoe, you can't ignore it. Worrying about that barrier just makes the situation worse.   So much so that it gets to the situation where you think that there is no alternative but to give up altogether, to take another course action or even move into a different line of business, so impassable does the barrier seem. 

But is it just a matter of perspective?  Just recently I had a client in such a situation.  The requirements in a key market had changed so dramatically that he seemed no longer able to win work in the area.  And it was not a matter of his technical ability.  That hadn't changed.  It was the white slime, the red tape that now went with the job that he couldn't overcome.

And it had become more than a burr in his shoe.  He saw it as completely impenetrable, a maze from which there was no possible exit.  Such was his concern that, after 20 years in the business, he felt it was time he moved on and found a new, different business.  The worry was completely dominating his thoughts, so that he just couldn't get it in perspective.

So how could my client view the situation from a different perspective?  Well for a start let's step back and look at his overall market and where this particular market fitted.  Dimensionalise the importance of this market against his total market.  Sure, it was important with some nice sized contracts, but it wasn't his only market.  He had others which collectively made up over 50% of his work.  It would be a pity to give those away.  That would be throwing away the baby with the bathwater.

Next, let's compare some actual and opportunity costs against the value of 20 years accumulated knowledge of the business and its market, the background intellectual property as it is sometimes called.  And if you can survive 20 years in a business you will have accumulated a lot of such knowledge. 

Going into a completely new business not only means throwing away all that knowledge, all that accumulated value, but also incurring a significant cost in time and money to learn a new business.  And you know the survival rates of new businesses over the first 3 - 5 years.

Now compare that cost and loss of value to the cost of learning the skills to overcome the impenetrable barrier.  Is it really a barrier that completely blocks progress?  Or is it just an impediment to be overcome and brushed aside.

The different perspective gave my client a completely different view of his situation.  And that new perspective gave him the energy and drive he needed to learn the required skills to brush aside the now-perceived impediment.

Would a different perspective help you overcome a previously perceived impenetrable barrier?  

What  are your thoughts?  Is this you?  This email address is being protected from spambots. You need JavaScript enabled to view it.

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© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective

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