What is the foremost goal of a successful business? To make a profit. Now, this may seem obvious, but in working across industries, it seems to me that many businesses need a reminder. I see this time and time again, clients getting so mired in details and day-to-day fire drills they lose focus. The ultimate objective: stop worrying about revenue and volume, and focus on profit.
Let’s take it back to basics. Every structure is made up of building blocks. Think of your customers as the building blocks of your business. If each building block you add to the structure is profitable, your structure becomes stronger and taller. If you lose sight of which type of customers you are acquiring, pretty soon those building blocks will weaken your structure. Remember the 20-225 rule of profitability, i.e. 20% of your customers account for 225% of your profits1. That sounds like a lot of unprofitable building blocks to me.
There are 3 fixes that you need to make in order to acquire customers that will strengthen your foundation of profit.
Fix your pricing process
At every company I have worked with, I’ve found that there is significant price leakage, i.e. discounting. Some companies discount to keep customers while others discount to acquire customers. Here's the bottom line: customers acquired via discounting are not your best customers, and never will be. They are the same building blocks that weaken your structure, feeding off your limited (and valuable) resources while not paying for it.
Fix your product strategy
This is probably the most valuable tool you can use to pick the right customers for your business. All you have to do is match the product to the customer’s willingness to pay. It’s really that simple! If your target customers want top-quality product and service, then focus on the premium product and ensure they pay for it. If your target audience just doesn’t have the budget, settle for a bare minimum workable solution and price it appropriately. Having that discipline, and the tiered offerings to go along with it, will mean everything to your business and will help you add the right building blocks to your structure.
Fix your negotiation strategy
Good process and tools will get you nothing if you can’t execute. That’s where your sales force comes in. Anyone can make deals if they discount their way to the dotted line. Sales should be the ones matching the customer’s budget to the value delivered. Catching a Poker Player and calling their bluff is a key way to align price with value. Do it well and you will see your structure quickly grow stronger and taller.
Your team works hard to deliver the best to your customers. Make sure you are picking the best customers for your team as well.
If you would like a deeper dive on acquiring profitable customers, I’d love to send you one of our whitepapers, detailing the hidden cause of vaporizing profits—and how to get in front of it!