May 2008

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2008</I></div> <div> <I>The following article was first published in the Eastern Daily Press' 'The Business'  on 14 May 2008</I></div> <bR> <div> <B>The most important investment you can make</B></div> <bR> <div> Recently I've been running some workshops for owners and managers of small businesses as part of a leadership development programme I'm involved in.  One of them focuses on business growth and we introduce the participants to a few classic strategy models to aid them in considering the different possible routes to growth for their business.  We also look at a range of assessment tools that can help them define the current state of their business as a preamble to setting growth objectives.  The group then explores the marketing, financial and people implications of various options for growth such as product or market development.</div> <bR> <div> Another session is about understanding the concept of return on investment.  In this workshop, financial measurement and analysis is examined because if you can't measure your progress, you can't know if your growth objectives are being achieved.  All of this provides useful tools to guide the participants' thinking about and planning for growth and deciding how they can best deploy their resources. </div> <bR> <div> The more businesses I observe and work with, the more I study, and the more successful business people I talk to, I'm increasingly convinced there is one area of business activity that should be the primary focus for everyone seeking sustainable growth and profitability.  </div> <bR> <div> Business owners regularly face decisions about expenditure:  the purchase of a new piece of equipment; commitment to an expensive advertising campaign; the hiring of a new member of staff.  Many of these concern the normal running of the business and are costs that should, of course, be managed prudently.  But there are a lot of key financial decisions that are about making investments - spending money in anticipation that it will generate a return: you will ultimately earn more than you spent.  Making decisions that give the greatest return on investment is an important responsibility of leadership.</div> <bR> <div> In every business, there is a cost of acquiring new customers, and the longer a customer remains loyal to your business, the greater their lifetime value.  I've referred before to Murray Raphel's idea of a Customer Loyalty Ladder, and I use his model frequently to show people the importance of what I consider the most important investment any business can make - customer service.  The more effort that is put into delivering truly excellent customer service, the higher the return on investment.  </div> <bR> <div> Moving customers up the loyalty ladder - giving them more reasons to remain loyal - should be at the heart of growth strategies.  Very satisfied loyal customers deliver profitable growth in several ways.  First, they generally spend increased amounts over time.  Secondly, the cost of servicing long-term customers is often less, because you've got to know them and are more efficient at delivering good service.  Next, loyal customers are often less price-sensitive and don't mind paying a small premium, provided, of course, that your service remains outstanding.  Finally, and most importantly, truly loyal customers recommend your business to others - their referrals bring more potentially loyal customers to you at no acquisition cost.   </div> <bR> <div> So, invest in finding out what your customers think about your service and in recruiting and training the right sort of people to provide the excellence they demand, and you can realise a return on that investment that guarantees sustainable, profitable growth.</div> </td> <td valign="top" width=180 BGCOLOR="#CC3333" TEXT="#080000"> <bR> </td> </tr></table></body>