I have just been asked what I’ve been up to — I have been very quite on the blogging front lately … here’s why. I’ve been totally re-writing the Boot Camp content to make it more focused on a program that will help you and your team get real results for your clients and your firm. Keep your eye on this spot for more details.
In the meantime, my colleague Mark James sent me a summary of an experience watching the 4 ways to grow your business be executed by a business in Sydney recently. I thought it would make an excellent “guest blog” entry so here it is, it is something you could share with your clients to let them know that even in these tough times opportunities to run a better business are everywhere.
A recent storm blew 20,000 tonnes of red dust from Western NSW to the East Coast of Australia and on to New Zealand leaving my, and every other Sydneysider’s, car covered with a layer of orange dust. An unwelcome event, but one that led me to a local car wash cafe where I was able to observe the clever implementation of the 4 Ways to Grow a Business principles with, no doubt, a very tidy profit being made along the way.
My morning went something like this:
At the car wash I was greeted by a concierge who kindly asked what type of service I wanted. I replied that I would like my car washed and cleaned inside and out for the advertised $42. Rather than just taking my keys and moving onto the next in a long queue of customers, the concierge walked me around my car and showed me the various imperfections on the vehicle that a wax and polish would remove. He explained that this, along with the wash and vacuum, would cost $95. I told him that I appreciated the time he spent bringing this to my attention but I only had time for a wash and vacuum.
My response did not deter this guy from the sales process in which he was clearly well trained. He was determined to ensure I was making an educated decision and, in a pleasant and non-confronting way, spent an extra couple of minutes talking up the benefits of choosing the wax and polish as a value added service. In the end we agreed that to-day I would settle for the basic service.
I heard the same offer pitched to the next customer but in this case the concierge was successful. From this point my curiosity was aroused and my interest in business and its profitability got the better of me. I now wanted to know how much extra time it would take for the car behind me to get a wax and polish and thereby the additional profits the business would make in up-selling its customers.
Let’s look at the revenue side of the process. A wash, wax and polish costs $95, but part of the sales person’s sales pitch to me (in the latter stage of the negotiations) was to offer a discount of $10, so let’s assume this was also offered to the car behind me. By encouraging this customer to upgrade the business effectively increased the transaction size by 100%, in comparison to the base level wash that I purchased for $42.
Of course it’s essential to know the additional time investment required to deliver this extra value in order to quantify the additional profits that resulted. As both of our cars were in at roughly the same time, I all of a sudden had a nice little business experiment going on in front of my eyes.
2 cups of coffee later I had witnessed a brilliant example of a business practicing the 4 Ways to Grow to great effect.
My car took 50 minutes to get through the end to end process and I was delivered a clean car that I was satisfied with (although the marks the concierge pointed out were still there, as agreed). I had therefore received good value for the outcome and customer experience I had paid for.
Now what about the car behind me?
In order to see the result of my experiment, I needed to wait around to see how long it took for the car behind me to get the wax and polish. So, when my car was ready I parked it across the road and went back to the café in the car wash and bought another coffee.
What was the result?
The car behind me took an extra 20 minutes to get through the full service. I watched the handover of the keys to the owner of the car behind me and the quality and value of the service clearly met his expectations.
Therefore, the Car Wash had created 2 happy customers who got a successful outcome and felt the fee charged adequately reflected this value, even though one of us had paid 100% more than the other.
Let’s Do The Numbers
Through having a planned and efficient sales process, the business received a 100% increase in price for every customer they sold up to the wax and polish. To deliver this additional service the business utilized an additional 20 minutes of capacity plus some materials (let’s assume a full cost of say $10) which then yielded incremental revenue of $43 assuming the car owner got the $10 discount. The result is an incremental profit margin of $33 on each up-graded customer—nearly double the profit on my transaction. Pretty impressive stuff given that all it took was a 3-5 minute sales consultation.
By the way, while I was there as many cars were receiving a wax and polish as were receiving a standard wash and vacuum, so the conversion rate of the sales people was running at 50%. I wonder if they measure that? I bet they do because I suspect the owner of this business understands that what you can measure you can manage.
What this business has done that so impressed me
Through a planned and methodical process the business is focused on increasing its profitability by engaging in simple but effective business practices, resulting in an increase in the average transaction size of 51% (assumes a 50% conversion rate of customers that include a wax and polish as part of the service) and in the process greatly improving the profitability of the business.
On The 4 Ways To Grow A Business
So far I’ve only discussed 1 of the 4 Ways to Grow your Business (increase your average transaction value). Let me finish the story.
After I left my car with the attendant, I went to the café to have my complimentary coffee and decided to buy a muffin (an increase in the average transaction size).
I sat in a cafe that was well presented, clean and had some relaxing background music playing, plenty of reading material, a TV area and a mix of lounges, chairs and tables (something for everyone). The experience was pleasant and I would happily go back (increasing the frequency with which you deal with them).
The business is located on a main road in a busy area of the community in which I live, it is well signposted, and always looks clean and tidy from the road, hence a potential customer would be enticed to try their service (increasing the number of customers you have).
Once inside, your perception of this business does not disappoint. The team members are all well presented, clean and tidy, the supervisors and managers are well identified by a different uniform, every team member is courteous and welcoming and there are clear systems and processes in place at each stage of the product cycle that ensure efficiency and productivity (improving the productivity of the business resources).
To conclude my story, before I drove away I was given a voucher for a $5 discount to use on my next visit that has an expiry date to ensure I am encouraged to come back within a time frame (again, increase the frequency with which you deal with them).
What are the take aways?
Let’s first recap on the 4 ways to grow a business:
- Increase the number of customers you have.
- Increase the frequency with which you deal with them.
- Increase the average transaction size.
- Increase the productivity of your business resources.
Do you think this is a profitable, growing business? And do you think it’s happened by luck or because they have a strong view of who they are and what they offer their targeted customers. I have a feeling they have a sound strategic plan that underpins all their systems and processes.
What inspired me to write this note is not to let you know of a good customer experience I had, BUT to challenge and inspire you to think of ways to improve the growth and profitability of not only your firm but those SME customers who choose to work with you.
It may be easy to applaud this business but still argue that their success would not translate to another industry. But why not? Their strategies could easily apply to any commodity-style of business. Their success highlights a point I made in an earlier article “Long Term Business Success through Tough Times” that if you find it hard to create a point of difference for your product or service then you need to focus on the process by which the product or service is delivered. Both what and how you deliver can create a compelling value proposition for your customers.
The owners of this car wash have built a strategy on a strong sales protocol and a customer experience. As a result they are not attempting to compete on price.
In the last few weeks, now that the dust has settled, I have made a point of driving past the car wash and the place is always humming. In my view this is the result of good management not good luck.
On the issue of price, some people may say “why would I want to pay $42 to get my car washed. I can get mine done for $25.” Fortunately for the people who own the business not everyone in Sydney wants to go there! They’re happy with the subset that are willing to put $95 on the table.
Managing Director, Principa Coaching Pty Ltd.