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Good Profit vs. Bad Profit
OK, here's the skinny on making profit. Good profit leads to sustainable success, while bad profit leads to demise. You may be asking - "Isn't any profit good? I mean...it's profit!"
In his book The Ultimate Question, author Fred Reichheld talks about the difference between good profit and bad profit. Paraphrasing Mr. Reichheld - he states that at the end of the day, your CPA, the IRS, shareholders - or anyone else not intimately involved with your business practices cannot tell if that bottom line profit is a good profit or a bad profit. They cannot tell if that profit is sustainable or short lived.
How do you know if you're generating bad profit? Here are a few rules of the profit road to follow.
Whenever a customer feels mislead, mistreated, ignored, or coerced, then profits from that customer are bad. - Fred Reichheld
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Bad Profits arise when companies save money by cutting overhead and thereby delivering lousy customer experience.
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Bad Profits come from unfair or misleading pricing.
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Bad Profits come from sales reps pushing overpriced, or inappropriate products or services onto trusting customers. Can you say "car repair shop?"
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Bad Profits come from complex pricing schemes and hidden fees that dupe customers into paying more than necessary to meet their needs.
To summarize - Make sure that your number one objective is to sincerely take good care of your customer and to provide consistently outrageously great customer experience! Even if you have to spend a little more time and a bit more money to make that customer happy, your sustainable profit will come. Even if you have to forego a sale because it just doesn't make sense for that particular customer, your sustainable profit will come. Why? How? Sustainable profit will come because you are creating loyal customers and building a powerful emotional brand - and you are doing so because your focus is on the relationship. If your focus is on the profit, you'll do anything you have to to make a profit - even at the expense of a customer. That profit will soon be gone and so will your brand.
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