Plans for the Food For Thought workshop are coming together now, and its looking exciting.
I’ve lined up great speakers to join me, and together we will address:
* pinpointing what your customers value,
* which products or customers are worth most to you
* getting noticed by the right customers
All building towards making sure sales growth in 2018 brings profit growth at the same time.
The idea behind the workshop was the number of businesses whom I have met with in the last 5 years who have got themselves into trouble because they put all their effort into getting more sales when what they really wanted was more profit.
If you sell more than one product, to more than one customer I would be prepared to bet that some of the sales are super profitable, but some only just cover their costs.
That’s usually unavoidable, but the key thing is to make sure YOU have made a decision to make the not so profitable sale instead of just being led by what the customer wants.
Selling what the customer wants is not guaranteed to make profit for your business. However, direct profit isn’t the only factor to consider; there’s also issues like keeping customers happy, spreading delivery costs, and establishing a reputation to allow you to develop other products. The challenge was illustrated quite nicely by a business that I met with last month:
The have two product lines which sell well, in large quantities, and are profitable. They have another product (product C) which sells in smaller volumes, is not profitable and causes lots of problems for their factory because they need different processes and different ingredients.
From a finance perspective product C is a disaster and should be discontinued as soon as possible and the factory manager would agree wholeheartedly with this.
However there are other things to consider; the customers who do buy the product love it and the retailers who stock it can’t get enough. Also, competitors who make either one or both of the profitable lines don’t make product C so retailers will not move away from this business while they offer something that no-one else does.
So, from the sales and marketing team’s perspective the business should sell more of this product, even though it is not profitable!
The solution here is to have enough information to know that some sales of product C is good, but more isn’t necessarily better. And a balance between the perspectives of sales, marketing, operations and finance is essential to success.