Boosting your Profits through Consumables

There’s a big trend in consumer products today that merits the attention of every business owner. Understanding how to leverage these principles can improve the profitability of nearly every business model.

I was recently working with a member of a local marketing group here in Tampa who is a website designer, let’s call him Fred (not his real name). I got out of the “web design” and “SEO” businesses because of the same things Fred was complaining about.

I shared a number of insights with him that you can probably use in your own business.  Then I thought about some other real world examples are sure to get your creative juices flowing about increasing your profitability.

He was complaining that the sales cycle for web sites was  astronomical. He would spend 6 months courting someone, working up proposals, and so forth only to find that his price way beyond what they were considering. Of those few who accepted his bid, once he hit them up, aside from referrals, that was it — he was done — no more business from that customer for some 2-3 years, or maybe ever again.

Now this guy’s business model needed quite a bit of help. Here are a few of the marketing tips I shared:

1. Fred’s customers are poorly qualified. He’s spending way too much time talking to people who won’t pay the money. Maybe he’s afraid of scaring them off too early in the game, but that’s better than wasting billable time on proposals for clients who will never be.
2. He refused to “skimp on quality to deliver a cheaper product”, as he puts it. This may feel like adequate justification for his actions.  However, from my perspective, his young organization is failing to meet the true demands of the marketplace while he clings to “what he wants to do” rather than “what is wanted”. While I wished him the best of luck in attempting to pursue his dreams, this is a recipe for marketing suicide. Starving artists are a dime a dozen.
3. He has no follow-on products or services for his clients, nor does he have a referral program. I made a few suggestions for how he could work with his clients to provide a maintenance package at a price lower than his clients would be likely to find elsewhere or than they could do it themselves when you lump in the costs of learning the technologies, etc.

Let’s take a look at the Swiffer WetJet or the Schick Personal Touch Razor . Remember the good old days of just replacing the mop head? Or just replacing the razor blade when the blade wore dull? No more… now, you will buy replacement products far more often by imposing a shorter lifespan of these products.

How can you force more frequent consumption?

Well, the WetJet requires that you buy their specially fit container and their special pads to fit in their special mop handle that ties it all together. Once the disposable pad gets too dirty, you’re out of luck, you have to toss it in the bin. No more rinsing out the sponge head until it’s worn out – that’s the OLD way to do things. Oh, once you’ve stocked up on refills, if you break the special handle, you’ll have to buy a whole new starter kit to make sure you use up everything you’ve already bought.

And the Schick razor has a little moisturizing strip on it. The strip loses its luster in about 2-3 weeks, while the blade remains quite sharp. The strip starts pulling apart and makes a mess of things and generally makes the shaver think “Well, that’s the end of this one, innit?” As a result, perfectly usable blades are tossed out long before they’re ready, and more consumables are purchased, and the prices of these refills are ludicrous. So you wonder when you’re shopping for refills: “Should I buy that memory upgrade for my computer, or the 10-pack of refill blades?” It’s little wonder this gems are kept up by the cash-registers to reduce pilferage.

Microsoft and the Anti-Virus companies do this with their “annual licensing agreements”. No longer can you just buy software and own it and use it and be done. Oh no… you must pay them each and every year for improvements and support – otherwise that bug they left in some 5 years ago will be there to haunt you when an abusive programmer from the Axis of Evil figures out a way to turn it into an ATM machine to fund terrorism.

Now while I may lambaste this from a personal perspective, your business can certainly benefit from finding a way use this model. If you can pull it off without appearing abusive, you can leverage this tool to keep your clients longer, sell them more, and leave as little money on the table as possible.

For example, “plumbing clubs” – if you join the plumbing club for only $20 a month, you get our services for 10% off all year long. If you don’t use our services, you get a refund. This makes sure that the customer calls your plumbing company FIRST if they have a problem. Many customers will fail to request a refund, and it can become its own profit-center.

Think about it… Think about ways to use this in your business. Then, let’s discuss how to implement it.

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