When companies don’t understand the difference between good and bad profits, growth suffers, and you lose customers.
Bad profits are those profits that might increase revenue but at the expense of the customer.
Whenever customers feel misled, mistreated, ignored or coerced, the result is a bad profit. Essentially, it means that the company takes value from it’s customer instead of adding value.
An example of bad profit is this is the story of a major car rental company in the US. Most car rentals have a 59 minute grace period for the customer to return the car before they are charged another day. On average, customers at this rental company brought the car back 45 minutes after the car was due to be returned. Knowing this, the company changed the grace period to 30 minutes thinking they’d be able to make a lot of money from late returns.
Rather than making an announcement for the change, the company placed a sign on the service counters only. Within 2 weeks the impact was felt from 6 of their largest clients who threatened to sack them.
A good profit gives value to your customers and a good profiting business has loyal customers and raving promoters.
Good profit benefits both the customer and the business, this occurs when a business creates value to the customer and they keep coming back for more. These customers tell their friends and family to also do business with you, they become your promoters and create good profit for the company and to create growth that is sustainable.
The key is to perform an overall evaluation of your business and identify the areas that bring harmful returns and then create the steps to change and improve those behaviours. Re-evaluating the business and making changes whether big or small, will bring in good profits and ensure you are in business for a long time to come.