One of the most common mistakes companies make when they are trying to boost their profits, is to try and get new customers. Typically this behavior is a reflection of their history. When they were new, they probably had zero or just a few customers. To survive, they had to get more. Getting new customers made sense.

For companies that are trying to boost their profitability, acquiring new customers is not the best strategy. Studies by Cap Gemini and Gartner Group have shown that it costs three to seven times more money to acquire a new customer than to get an existing customer to make a new purchase

Thus, the best profit-boosting opportunities lie in optimizing the relationships you have with your existing customers.

Strengthen your pillars
Do you know which five of your customers contribute the most to your bottom line each year? You should know this data off the top of your head.

Depending on the size of the organization, a loss of any of the top five customers can range from serious to catastrophic. These clients are the pillars supporting your company.

Think of your business as a structure sitting in the middle of shark-infested waters. Five pillars are arranged in a circle and your business balances on top of them. What happens if one or two of those pillars shrink? What happens if one of them goes away completely?

Part of the key to optimizing profits is securing your pillars. If you look at the amount of time your organization spends on customer service, and break it down by customer, would you find that your “pillars” are the five customers who get the most service?

Most likely, they don’t; problem customers usually command the most attention. Change that. Take the resources being applied to the problem customers and focus them on the pillars. Task those people with making your relationship with the pillars so strong, that they will never crumble. Challenge them to find ways to help the pillars be successful. Be a pillar to your pillars.

Map your offerings
Starting with your pillar customers, take an inventory of all the services that you currently provide. Rank them in order of profitability. When all the offerings have been identified, categorize them from one to five; ones should be the 20 percent of the offerings that are most profitable. Twos will be the next 20 percent, on down to five, your least profitable tier.

Now, create a grid with clients across the top, and offerings down the left side. Arrange the clients in order of how much they impact your bottom line. The most impactful client should be the first one, and the least impactful client should be the last.

When you have finished, go through and for each client put check marks on the services you provide for them. This is your profitability map.

Attack the gaps
Look at your pillars. How are you doing in terms of providing your full suite of offerings to them? Any boxes without checks represent an opportunity for you to solidify your relationship. Start with the offerings that are ranked one, and not being used by your pillars, and focus on getting those blanks filled in.

Now look at the rest of your map. Where are the check marks? Where are the gaps? Every gap represents an opportunity to boost your profits. Start with the more profitable clients, and try to fill in all the ones and twos. Educate those customers about the additional products and services you offer. Find out what needs they have and identify ways you can fill them. These efforts will not only strengthen your relationship, but it will also make them more profitable clients for you.

Learn from your “lovers”
Take another look at your graph. Find the five customers who use the greatest percentage of your services. These are the customers who just love what you do. They represent a tremendous learning opportunity.

There is some reason or group of reasons that these customers love you so much. If you can find out those reasons, you can apply that knowledge to the way you interact with the rest of your customers. Perhaps a particular salesperson has figured out something that is really working. Maybe the account representative or customer-service contact is particularly good. Maybe your workers are.

Interview those “lovers” and learn from them. Within those interviews lies profit boosting information. Gather it and then apply the learnings to the way you interact with your other customers. Again, start with the pillars and then work your way across the customer list.

Most organizations acquire customers by filling a single particular need. The key to boosting profits is not to go out and get more of those customers. Find and strengthen your pillars so that your organization is well supported, inventory your offerings, fill the gaps, and learn from your “lovers” — because those four steps are the way to boost your profits.

John Strelecky is the author of “The Why Are You Here Café” and a nationally recognized speaker on the topic of “Creating The Perfect Company.” A graduate of Northwestern University’s MBA program, he has served as a business strategist for numerous Fortune 500 companies, and co-founded the Business Philosophy practice at Morningstar Consulting Group LLC. He can be reached through his Web site.

BOOK REVIEW

To Discover Strength, You First Have To Define It

By Dan Weltin, Assistant Editor

Now, Discover Your Strengths by Marcus Buckingham & Donald Clifton, Ph.D. (The Free Press, 2001. $27.00 hardcover, available on CD and cassette)

In First, Break all the Rules, authors Marcus Buckingham and Curt Coffman identified four keys to becoming a great manager. Now, Buckingham along with Donald Clifton, Ph.D., goes one step further by devoting an entire book to one of those keys: focusing on your strengths.

The lesson of Now, Discover Your Strengths is that the best way for employees to excel at their job is to hone in on their strong points. Managers shouldn’t waste time fixing employees’ weaknesses, but instead make sure the work they do harnesses their strengths. This is not to say managers should ignore weaknesses, but employees don’t need to be well-rounded in order to exceed — they just need to know how to manage their weaknesses.

This is good advice. Each employee is different and each has different strengths.

So, what defines strength? This question is a little tricky to answer and is where the book loses its punch. According to the authors, strength is broken down into three components: knowledge, skill and talents. Knowledge is both facts and experience; skills are the ability to structure that knowledge; and talents are similar to personality traits that make up the individual. Deciphering between talent and strength gets a little murky and keeping the definitions straight can be confusing.

In the last few pages of the book, the authors pose a question that would make a useful book in of itself: How do I promote an employee without moving him into a job that doesn’t encompass his strengths?

This is a problem that faces many industries, including cleaning. People want prestige. People want to be recognized. If an employee has been a great janitor for a number of years, how do you reward him? Maybe he isn’t qualified to move up the company ladder to be a sales representative. What are the alternatives?

Buckingham and Clifton suggest promoting by title, recognition and money — which could result in a top-notch janitor making more than a new manager. This may sound odd, but the authors make a convincing case. Someone who cleans expertly on a consistent basis deserves more money than someone fresh and inexperienced with a prestigious title.




POSTED ON: 3/1/2004