Richard Martin Gives Strategies to Grow Revenues and Profit
August 2, 2012
We're in the 'dog days' of summer, as they say in baseball, so I'll just offer eight quick ideas for boosting revenue and profit and that you can reflect on during your vacation.
* Look in your own back yard. I have a client that has traditionally offered its services only to out-of-town clients, but they have recently started prospecting in their own city as a means of generating new revenue. They can offer identical or similar services at a cost of acquisition that should be significantly lower. It will also offer significant opportunities to develop long-term relationships.
* Look for product or service gaps in existing or new segments. BRP developed the Can-Am Roadster three-wheeled road vehicle to address the need for a type of motorcycle that would provide more stability and ease of driving. It basically looks like a snowmobile on wheels, with two distinctive road wheels at the front, rather than the single one of a traditional motorcycle. You can drive it without a special two-wheeler license and it only requires a 7-hour course at the dealership. BRP was therefore able to meet the need for greater stability, safety, and convenience of customers that would not normally have bought a motorcycle, but that wanted nevertheless to enjoy a similar experience.
* Distribute your own products. Can you find a way to replace or supplement your distribution channels? This is what Apple has done with its Apple and iTunes stores. Apple is therefore able to generate greater revenue and increase overall margins, but more importantly it has much more control over the buying experience. Bombardier Aerospace created a business jet fractional leasing program to generate more customers for its business jets. Recreational sailboat manufacturers and condo builders many years ago figured out the same business model by allowing repeat vacationers to share ownership or to recoup the costs of buying and owning vacation properties.
* Find new applications or intensify use of existing products/services for existing customers. This is part of a market penetration strategy. Many years ago, household products company Church and Dwight started advertising the fact that its baking soda (Arm & Hammer and Cow Brand) could also be used as deodorizers. Now it markets its baking soda in a variety of deodorizer packages for refrigerators, garbage cans, and other applications.
* Use the power of customer networks. I remember a TV commercial for shampoo in the 70s that showed a woman using the particular shampoo and then saying, "I told two friends, who told two friends, who told two friends" At the same time, the screen showed the multiplicative power of spreading the word about this product. You can't get more illustrative than that, and it shows the power of social networks, even before the Internet. For providers of professional, trade, or personal services the best form of marketing and business development is personal referrals from satisfied buyers to other potential buyers. If you're in these categories of business, you should be asking all of your current customers for referrals to three potential buyers. Offering incentives can also help.
* Offer new or complementary products/services to existing customers. This is known as the product expansion strategy. The idea is that it is easier to figure out what existing customers need and want than to venture into the unknown. Business acquisition costs are also much lower as there is already an existing relationship. Manufacturer or retailer offered financing to support sales is a perfect example of this type of strategy. Another example is Gillette's approach of offering a whole family of self-care products to men, based initially on shaving.
* Offer existing products/services to new customers. This is known as the market extension strategy. The idea is that there may be entirely new markets, the needs of which can be met by your products or services. Church and Dwight also provided an excellent example of this approach when they developed toothpaste that contains baking soda. I can remember my mother telling me to brush with baking soda if we happened to run out of toothpaste. The company simply leveraged the existing beliefs and ancillary uses of their product to create a whole new family of products.
* Adopt a more general or abstract approach to your activities. No matter what we are offering as products and services, they can be viewed as an example of a more abstract and general category. This can often be used as a way of generating new ideas for products or services that are viewed as more valuable by customers. The key is to ask what the particular product or service is an example of, and to generalize from that. This is exactly how IBM has grown and stayed at the forefront of the 'business machine' industry over decades. At first IBM simply offered calculating machines (before the days of electronic computers). Company management saw that this was just one particular type of business machine amongst others, so they started offering other types, such as punch card machines and readers, and typing machines. Then when digital computers came along, they got into that business also. Eventually, they realized that they were really in the business of helping their customers manage their growing mountains of information, so they got into software and all forms of information management consulting. Nowadays, they are the largest software and IT consulting firm in the world.
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