Is sloppiness eating your profitability?
Tuesday, February 7, 2012/
Years ago, when coffee beans started getting expensive, some of the instant coffee manufacturers replaced a little of the good coffee with a cheap substitute. At first they replaced just a few granules. Customers didn’t seem to notice a change in the coffee taste, but the manufactures got to make it a little cheaper. Bingo!
Over a number of years the coffee manufacturers gradually replaced more and more of the good coffee beans with the cheap substitute, to the point where a significant proportion of the coffee wasn’t really coffee at all.
It wasn’t a decrease in the number of existing customers that uncovered the issue. Existing customers were still buying plenty of “coffee”. The change in taste had been so gradual that they barely noticed.
But there was a chronic shortage of new customers. Young adults weren’t buying coffee. It didn’t taste good so they didn’t get into the coffee habit.
It took a new coffee experience – Starbucks – to reverse the move away from coffee. And they brought coffee back by getting it to taste good again.
A similar thing happens in many businesses, although more by accident than design.
When a business starts out it does everything to the highest standard. Delivery dates are met, phone calls returned, customer issues investigated, etc
Sooner or later, unintentionally, something doesn’t get done quite right. A delivery, let’s say, is a day late.
The business waits for the fall out. But nothing happens. The customer doesn’t scream. The world doesn’t fall apart. It’s business as usual. Phew!
But because the missed delivery wasn’t such a big deal the business starts to relax a bit. A few more late deliveries, no dramas and slowly the business changes. Instead of doing everything possible to get deliveries made on time, the business (or rather, the person in charge of that area) decides on-time deliveries are a “nice to have” rather than a “must”.
Eventually customers do feel a bit cranky but they accept that that’s the way you do business. “Always a day late” may become your nickname but it’s not a big enough deal to make a fuss about. They don’t tell you.
So does it matter?
Well, existing customers are still buying so all good there. But they don’t sing your praises any more, they don’t refer you to potential customers and if a better option presents itself they are likely to leave you.
It’s a silent problem and by the time it’s noisy and you do hear about it, it’s too late. Sloppiness destroys by stealth.
So what can you do?
A great way to identify sloppiness is to get a group of your oldest employees together and ask them the question, “What don’t we do as well as we used to?”
Employees love to talk about “the good old days” and you will almost certainly uncover some gems. Recently businesses that I have worked with have identified areas such as customer calls being returned late, phones unanswered, late deliveries, short deliveries, etc. All small things that go largely unnoticed by the management team but are large enough to make an impact with customers.
The good thing is they are easily fixed.
Julia Bickerstaff’s expertise is in helping businesses grow profitably. She runs two businesses: Butterfly Coaching, a small advisory firm with a unique approach to assisting SMEs with profitable growth; and The Business Bakery, which helps kitchen table tycoons build their best businesses. Julia is the author of How to Bake a Business and was previously a partner at Deloitte. She is a chartered accountant and has a degree in economics from The London School of Economics (London University).