Managing Costs vs. Sales: Is Your Balance Out of Whack?
OK, I'm a merchant and a marketer. I believe that nothing good happens until somebody creates a quality product or service offer, then markets and sells it well. I confess, I have that bias.
Having said that, I'm constantly astounded by the number of people in our industry who have a cost-only orientation. They believe their sole job is to reduce costs as opposed to increase sales. You know those meetings — the ones that focus only on how you can reduce costs with little or no consideration to value received.
Thankfully, I also deal with many owners of privately held companies in the market today who are steering their companies to value creation for the customer, even if it costs more. Here are some examples of what I'm talking about:
- Some marketers have shifted their call centers offshore, only to find out that they lose the “cultural connection” with their customers that fosters upsell and cross-sell purchases and customer retention.
- Others focus only on the cost of their catalog printing, overlooking the benefits that an experienced catalog printer can bring them via co-mailing, postage discounts, variable data printing, ink-jetting, co-binding, among other things.
- Still others focus on hiring call-center workers for the lowest possible wages, without really understanding that more experienced and expensive call-center reps can yield 50 percent-plus productivity increases from upselling, cross-selling, error reduction and customer satisfaction. (And as far as your customer is concerned, that call-center rep IS your company.)
- Some have experimented with new technologies like voice over Internet protocol telephone systems to save money, only to find calls dropped or call quality diminished.
- Lastly, others reduce expenditures on various office supplies and tools that make their payrolls less productive. The cost of new, productivity-boosting technology is often easily justified when labor savings are considered.
Don’t get me wrong: I'm not advocating reckless abandon spending, particularly in these times. On the other hand, this selling environment has us fixated on cost reductions rather than putting more of our energy into how to boost sales.
I bet all of you would like a 10 percent sales increase, as that would alleviate the pressure on a great deal of mandatory cost reductions. Spend 90 percent of your time thinking about how to increase sales and the other 10 percent managing costs. There's more to come on how to increase sales in these difficult times next week.
Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at TerryJ@AbilityCommerce.com.