One of the problems of doing business during the war is that it’s virtually inevitable that your phones are going to stop ringing, customer traffic will whither, sales will decrease and your people will have time on their hands.
Unfortunately, the natural inclination in times like these is to run huge sales, cutting prices to buy more business.
We don't recommend doing this. Remember that your customer’s attention is focused elsewhere, not on running out to support your huge sale. So, you'll pay lots of extra money to promote your sale, and the sales that result will be less profitable. The net result - an unprofitable sale!
Our recommendation? Instead of sweating trying to pull in more customers, spend this time doing those things that will build your business in the long term - those things that never seem to get done because of the pressures of day-to-day business from your customers. Analysis, planning, customer service and training are all potential tools.
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Possibilities include:
1. Analyze your customer base. Who are your customers? Where are they from (plotting them on a map is oftentimes helpful.) What do they have in common? What businesses are they in?
But analysis does no good without application - how can you reach more people who are like your current customers? Create a plan to do so, with specific action steps to reach and convince them to try your products and services.
2. Analyze the profitability of your current customer base. If you're like most companies, a small portion of your current customers deliver the bulk of your profits, and most of the time, your biggest customers are not your most profitable ones. Create two lists, one ranking customers by net sales, and the other by net profits. Then look at the differences and why they exist. Is it what they buy? Is it because they're a house account so you don't have to pay a sales commission? Is it how they buy, requiring less of your staff’s time?
Next, look at your least profitable customers. What do they have in common? Is it possible to move them into profitability? How would you do that? Or, are they hopeless, and should just be fired? We make it a practice to fire 10% of our client base every year. Some we fire because they're not profitable, others we fire because they're a royal pain to deal with. And it’s amazing, every time we do this, another better company shows up to fill the vacuum, and business becomes easier and more pleasant.
Application: Create an action plan to make each of your customer’s more profitable. Consider especially the changes you can make to your product line, promotion materials and customer base to make that conversion.
3. Analyze your product mix. It seems counter-intuitive, but one of the best ways that you can build your profitability is to get rid of products that don't generate significant levels of sales. Remember that inventory, shelf space and working capital costs dollars, money that can be better spent in acquiring more profitable products or promoting the product line that you currently have.
Application: Rank your product/service line by sales volume. Then cut the bottom 5-10%. If you sell goods, return them to the manufacturer, or put them on clearance. If you sell services, remove them from your web site and other promotional materials.
4. Analyze your Web Site. Business has clearly turned to the web. But most companies have sites that are years old, that look horrible, and that aren't equipped to help customers do business online. More importantly, most companies sites aren't written to get good rankings on the search engines, so they get no traffic.
Application: Do a thorough review of your site and its traffic. Make changes to make it relevant, to ask for orders, and to get it high on the search engines.
5. Analyze your systems. The best businesses systematize how they do key tasks, eliminating questions, standardizing behaviors and removing costs from the system. Key systems to check are marketing, order processing, accounts receivable processing, billing, job costing, and customer follow-ups.
Application: Develop at least three new systems to handle tasks within your organization, write system descriptions and train your staff to use the new procedures.
6. Analyze your customer service practices. Employees develop bad habits over time that turn customers away. Carefully analyze your customer service norms. How long do responses take? How empowered are your people? How do they deal with dissatisfied customers?
Application: Develop an action list of customer service problems that you need to resolve in your company, then get the training, do the performance reviews, and if necessary, replace the employees who create those problems.
7. Analyze your customer needs. In virtually every category there are some major unmet customer needs. You probably know what some are, but not everything.
Application: Pick up the phone or visit several major customers. Ask them to tell you about the biggest challenges in their business, and what they would like to see you do differently. Analyze your customer correspondence, ask your salespeople, and look at the industry literature for new products/services that you can offer and ways that you can change your current products/services to meet the unmet needs of your customers. Then create an action plan to better meet those needs.
8. Analyze your business plan. Are you hitting your numbers? Both sales and profits? What needs to be done differently to ensure that your year comes in on target?
don't blame the customer. Look at how you can better meet their needs. The best companies flex, reforecast and revise their plans frequently to achieve the desired objectives. Remember also, that the most common practice of cutting marketing funds to hit profit numbers is the last thing you should do if sales are low. Rather, figure out how to spend them more effectively, test, revise and test again to generate the results you need.
Application: Prepare a revised plan, including reforecast numbers, action plans and measurements.
9. Analyze your habits. Almost every business develops bad habits over time. Perhaps it’s a single ad that gets run over and over again, with no testing. Perhaps it’s a focus on a single trade show. Perhaps it’s a total reliance on sales reps. Perhaps it’s a constant pattern of useless meetings. Perhaps it’s a reluctance to do business in a changing world. Or maybe it’s an insistence on a six-week turnaround when you could do it in two if your systems were revised. Most of these habits had a reason behind them at one point in time, but have never changed through laziness or lack of analysis.
Application: Make a list of the things that constitute "the way we do business." Then analyze it carefully. Create an action plan to challenge and revise those habits that hurt your business.
10. Analyze the value you add. Businesses exist because they add value that the customer either can't or doesn't want to add. Unfortunately, the world may slowly change to the point where the value you add is no longer worth the cost required to obtain that value from you. Companies close every day for this very reason.
Application: Analyze the value you add versus what the customer really needs. Are you worth a continued position in the value chain? How could you add more value? What would people be willing to pay more to receive? Create an action plan to implement changes!
As you do these things, you'll find that your short-term sales and profits decrease less than they might have otherwise and that you'll find your business running at a higher level once the war ends - creating more sales and profits for years to come!
Who says that war will be bad for business?
Posted June 25, 2004
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