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Playing God

June 21, 2007

Thought, like all potent weapons, is exceedingly dangerous if mishandled. Clear thinking is therefore desirable not only in order to develop the full potentialities of the mind, but also to avoid disaster. ~Giles St. Aubyn

Deciding what a customer needs in terms of products and services is by no means easy. Clearly, every business is capable of providing many more services than a customer might need. In a like manner, a business can give a customer less than what they really need as well. Finding the balance between what the customer needs and what they can afford lies at the heart of a business' profitability as well as its ability to meet the needs of its customers.

One client we worked with was struggling with profitability. They were having trouble increasing profits. After extensive discussion, we ascertained that this firm was giving the customer what they thought was a competitive price for a number of additional services. While in theory this sounds good, the firm was incurring the cost of these additional services in a market that just did not value them. Consequently, their profits suffered simply because they were not really aware of what their customer really needed.

The idea of cutting back on their services was particularly difficult for this firm to accept. They felt that this was who they were and their integrity would be at stake if they were to discontinue providing the services that they thought the customer needed.

After repeatedly beating them over the heads, we were able get them to understand, and they came around. The firm has now aligned its service offerings with its prices, and its profits are doing very well.

As illustrated by this example, knowing what customers need is critical to profitability, and one of the best ways to find out is to talk to them frequently. I know one bank CEO that keeps his office very close to the lobby so that he can meet and talk to his customers as much as possible in order to ascertain what their real needs are. Other CEOs periodically go out and visit both large and small customers to find out how their firm is doing and to make sure that the firm is really servicing its customers.

A great way to make sure that you are not under or over-servicing customers is to send out a questionnaire asking them to comment on the products or services that you provide. The more input you can get about your customers' needs, the better you will be able to develop products to service them.

Now go out and make sure that you are not providing too many services that your customers just do not value.

You can do this!