How to grow profitably
by Joseph SantangeloOne of the toughest business challenges is how to increase sales profitably. The task is all the more daunting in a slowing economy and a saturated market.
Some managers seek big-bang growth through expansion and acquisition. Others search for the next new invention, product or service that will revolutionize the marketplace. Still others implement cost-cutting or productivity improvements to improve the bottom line.
To go the expansion or acquisition route often requires a major new investment, a gamble that may not pay off. A breakthrough invention may come only once in a lifetime. Severe cost-cutting often limits a company’s future growth potential and damages staff morale.
The key is to achieve profitable growth that maximizes the return on your existing investment.
It may be more exciting to make bold, dramatic moves. But many business analysts suggest a steady, stable approach to sustained, profitable growth. Adopt a systematic strategy from within, and train all employees to seize day-to-day opportunities in your core market.
Author Ram Charan, in “Profitable Growth is Everyone’s Business,” uses baseball terms in urging business leaders to avoid swinging for the fences and instead achieve profitable growth by grinding out singles and doubles.
Any customer contact by anyone in the firm is an opportunity for profitable growth. Everyone in the business should follow a coordinated process to convert everyday opportunities into sales.
Research, customer data, marketing and promotion all should support your profitable growth plan.
To create steady growth opportunities, you and your staff may seek to:
• Retain existing customers
• Encourage existing customers to buy more
• Serve new needs of existing customers
• Shift customers from competitors
• Bring in entirely new customers to the product or service
In this process, analysts propose various steps toward greater profitability:
• Have a strategy that is based on facts and data
• Stay close to the customer
• Solve customers’ problems
• Make it easy for the customer to do business with you
• Monitor and measure results
• Reassign resources if necessary
Technology and innovation also play a role. Information technology can help you become a more customer-centered growth manager.
You can quickly spot customer buying behavior, or who buy what products or services. You can analyze customer accounts, costs, revenues and profits to see who the most profitable customers are. You can see how you really make your money. You can identify trends and possible areas for improvement.
With research as your background, you can ask customers how you can serve them further.
What added value can you deliver? What product or service innovation are they looking for? Essentially, what else does the customer want?
For example, tourism, a mature but important industry on Cape Cod, could benefit from this approach. What are your tourist customers seeking? A bed and a beach or a total travel experience?
To provide a more complete getaway experience travelers are seeking, you may need to partner with a nearby restaurant, golf course, spa or attraction. At little or no cost, you may add value for your customer.
The key is knowing who your customers are and what they want, and then marketing to them as individuals.
The bottom line is that profitable growth starts with you. You might ask yourself, who are the top 10 percent or 20 percent of customers who account for most of your economic profits?
Ask your customers how you can provide better customer value. What value do customers place on the benefits they receive from you and how can you improve those perceived customer benefits?
Are there natural steps your company can take to improve customer benefits and advance company capabilities?
For example, if you are a builder or home improvement company, can you also expand into landscaping or home management services for past customers who are on Cape only part of the year and need someone to take such work off their minds?
The possibilities are endless, but growth strategies should follow your core competency and customer needs.
Originally published in the Nov/Dec 2006 issue of Cape Business.
Joseph Santangelo Joseph Santangelo has been a statehouse bureau chief, a corporate executive and currently works for the Connecticut Legislature. 
Cape Business Newsletters
Keep up with the latest issues affecting your business and your life! To sign up for any of the Cape Business newsletters, click here.