(This article was originally published in the Sunday Star Times and on Stuff.co.nz on November 27, 2016)
I was lucky enough to have travelled overseas recently and during this trip visited Whole Foods, a specialised supermarket in North America offering lots of healthy food options, with prices that seemed reasonable for what you got.
It was exciting seeing what they had on their shelves and my family and I really enjoyed buying food to cook instead of eating out. In fact, we filled our trolley with more than planned thanks to the great products and cooking inspiration they had on display. Whole Foods has perfected their offering to their customers and then expanded on it, creating a range of products that gets you buying more than you planned – the dream of any business.
It got me thinking about how important it is to tailor your product offering to your customer demographic.
One of the simplest ways you can really grow your business is by thinking about what your customers actually want. And then taking it a step further, beyond ‘what they know they want’ to ‘what they don’t know they want’.
Think a bit wider, longer term and creatively because you might come up with some new, cool ideas. Who are your customers, what are they interested in and how can you diversify, to offer them what they need – even if they don’t know they need it?
It might be a product or range of products. Alternatively, it could be a service. For example, some men’s fashion stores now have a barber attached. That is not clothing-related but it’s a service they knew most of their customers would be keen on. Some foodie stores now offer cooking classes. And I’ve seen homewares stores offering creative classes in subjects relevant to their customers, such as terrarium making or floristry.
Many businesses don’t cater to their customers proactively, so they never reach the potential profit they could be making on a ‘profit-per-customer’ measurement. If you don’t proactively offer your customers what they want, they will find it elsewhere and your share of their dollar will be lower than it could be, so think hard!
Of course you do have to be careful when taking on new products. Nobody wants a working capital issue due to having cash tied up in too much stock (assuming you sell physical products). It’s important you test the waters first before jumping headlong into buying or creating too many new products. All successful companies who continually grow the profitability by customer, are doing it in a manner that is measured and constantly iterated.
You can take an opposite view here too – sometimes you need to cull products or services that are not working but take up space and working capital.
Companies often don’t put enough time into analysing their product range and leave various products (or services) on the menu for far too long. This has the effect of customers getting bored with what you can do for them and it opens up the potential for customers to try out a competitor, likely the last thing you want. The worst thing is that it’s true what everyone says about the cost of attracting a new customer to replace a lost one: it costs up to seven times more to win a new customer than it costs to retain an existing one. If you keep your product offering the same for too long, who knows how long your customers will show you loyalty? It’s very easy to get bored in this age of “shiny, new things”. What are you offering to customers that is no longer working?
Once you liquidate these products and turn them into cash, it is likely you’ll have more money to re-invest into new products that will actually sell quicker because they are more appealing to your customer. The art of stock-turn and understanding of your products’ performances can be a key ingredient in ROI and business success.
Well-known examples of companies who successfully changed their product mix to both win new customers and to keep their current customers engaged (and likely more profitable) include fast food chains moving into healthier foods; fashion companies launching ancillary products like sunglasses, bags and homewares; and gas stations offering fresh food and coffee. Some have even started offering the olden-day “let-me-pump-your-gas-for-you” customer service. Have you seen the queues for these gas stations? In the right demographic, this is a big pull. You will be well aware of examples who did not move their product range in time as well like: Encyclopedia Britannica, Blackberry, Kodak and of course one day in the near future the need to learn how to actually drive a car!
Diversification of products is not guaranteed to work, but it is worth regularly reviewing to assess where you are at with your product and customer life cycle. Are you regularly considering your product or service range that you offer to your customers? It could be the difference between being successful in business or not.
Zac de Silva is an award winning business coach who owns www.businesschanging.com as well as being the co-founder of the Nurture Change Business Retreat in Fiji. If you like the questions that Zac poses, check out www.accme.co which will get you thinking on how to run a better business.