Picture this: you see a mountain reaching up into the sky. It may be a gentle, rounded mountain or one of those jagged peaks. Running down from the mountain are the slopes, stretching down gradually to the plains below. And the plains slowly run on to the sea.
Your customer base will be something like that. There will be a group of customers who provide the majority of your sales and profits, they are the mountain, making up the bulk in dollar terms of your revenue.
Then there are those who buy less frequently, or in smaller amounts, but are still regular customers. They are slopes of your customer mountain.
And lastly there are the plains stretching out to the distant sea, that great mass of customers who may comprise the bulk of names on your customer base, but in fact buy very little and do so only occasionally. In marketing terms, particularly in these days of e-marketing, they are known as the marketing ‘tail'.
When you promote your products or service, to whom are you promoting? The whole landscape, (i.e. everybody), or to the mountain, the slopes or the plains.
Let me ask you which landscape is going to give you the best return on your promotional dollar? As a small business my assumption is that you do not have unlimited dollars for promotion. I guess the corollary question at this stage is whether you actually measure the return you are getting now from your promotion. But that is a question for another day.
If you spend $500 on a promotion from the mountain to the sea, your promotional message will be about everyone, and no-one. The first thing any potential buyer looks for in any promotion is WIIFM (what's in it for me). Because your ‘landscape' message will of necessity be general no-one will be able to say "that's me", and be enticed into your message.
On the other had if you target a particular part of your customer base, and direct your promotional message specifically to their needs, they will be much more likely to say "that's me". And if they can say "that's me", they will be much more likely to buy.
So now ask yourself: who is more likely to buy; those customers on the mountain who buy from you frequently, or those who may only do so occasionally, and for small amounts at that.
© Copyright 1998 - 2008 Adam Gordon, Profits Leak Detective
Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?