Business Inquiry: “Having More Customers Means Having More Profits”

This is Jerry’s Business Inquiry example: “Having more customers means having more profits”

Jerry: “I am a business development manager for a mid-size consumer goods company, and my team has a real hard time with this. We believe that ‘having more customers means having more profit.’

Next, Jerry questions the common business assumption held by his team. As you follow his inquiry, I invite you to notice your own experience in life when you believe this thought. (Maybe yours is, “Having more money means having a happier life.” Or “having more friends means having more income.” Or, “…….?”)

Ask yourself: is it true? Is it true that “having more customers means having more profits”?
“Yes.”

Can you absolutely know that it’s true?
“No, we can’t be 100% sure.”

So how do you react when you believe the assumption that more customers equals more profit?
“Well, we go crazy trying to win new customers. We lower our prices, we go out of our way to sell. Sometimes our sales people push too hard. Sometimes they over-promise. Sometimes we fight with marketing or the product development team. . We stop trusting them, we begin to see it as “us,” the good guys, versus “them,” the bad guys, the ones not doing their jobs. We try to meet our quotas at all costs. Discounts, financing games. These hurt our business and our reputation.”

Who would you be without that thought?
“We might have more time and energy to focus on the customers we do have, or on improving our product. We could work on getting closer to our best customers, helping them thrive. We could become more valuable to them. We could tailor some of our products for their customers, helping them stand out from their competitors. And if they’re successful, we share in that success. They’ll buy more, we’ll sell more. We know their demographic quite well, and we could work together on making something of value for their customers. There’s a side benefit there. We’ll reduce our marketing costs if we can make the same revenue with fewer customers.”

Turn the belief around.
“Having fewer customers means having more profit.’

Might that be as true as or truer than the original belief?
“I can see that it might be at least as true. It depends on what we are doing to get more customers, and on what we could do without trying so hard to get more. We could focus on our most profitable customers. We could get closer to our most valuable customers. We could definitely be integrated more tightly. We could focus on helping our customers’ businesses do better.”

Can you find three examples to make that a true statement?
“One, we could focus on the customers that have the strongest cash positions, the ones who are most likely to weather the recession.

“Two, we could stop wasting time on difficult customers, the ones that keep changing their orders. They’re very high maintenance, but we keep them because we think we need them to meet our numbers.

“And three, we could stop serving customers that don’t pay in a timely manner, the ones with poor payment history.”

In this example, we see how challenging a simple but powerful belief in the sales team– that “having more customers mean having more profit” leads us to a new strategy to survive and profit in a recessionary economy. What’s more, the customers we get closer too during these trying times are the ones who will appreciate and trust us when times get better. So by shrinking our customer base, we actually improve our long-term profitability.