The Magic Of 15%

When a newspaper loses 15 % of its readers and 15 % of its advertisers-it goes out of business. But people still want to read it, but it’s gone.

When a company increases its sale by 15 %, it doubles its profit. Any sale above break-even volume guarantees huge profit margins. It is tempting to go for new products, new consumer segments and new markets, but only 15 % additional sale can do the trick for you.

In sports, the winner gets 200 % more prize money than the runners up. But he is not 200 % better than the next guy-he is just marginally better he may win a race by a few seconds only.

There is an interesting story about two Japanese being chased by a tiger in a jungle. Suddenly, one guy stopped and started wearing his running shoes. The other guy was baffled and said, “what’s the point? the tiger can outrun us in no time.” The other guy replied, “I just have to run faster than you.” The moral of the story- being marginally better than your nearest competitor can bring you dis-proportionate rewards.

So, try to get this 15 % additional sale from existing customers and existing markets. It will save you lot of money and sleepless nights.

There are some time-tested rules to get more sales from your existing customers:

  1. 80/20 rules: your 20 % key customers will get you 80 % of your sales. Are you doing anything special to take care of this segment? If not, why not?
  2. All action is the market: How much tome do you spend in the market? Most CEO’s do not visit their customers regularly. If you are not spending 25 % of your time meeting customers- you are heading for trouble.
  3. Training: Easiest way (and the most popular) to reduce cost is to stop all training. But a well-trained sales person can get you 30 % additional sales. To me, this is the cheapest way to increase sales.
  4. Build your brand: a good brand can be priced 15-20 % higher. A good brand can outsell its competitor 4:1. Allocate at least 5 % of your     estimated sales revenue for brand building. But do you need branding? Whether you are a corner paan-wala shop or Airtel-you need branding.
  5. All stuff is important : Do you know that 55 % of your inventory may be of slow moving products ? If you can reduce your purchase bills by 10 %- your ROI will increase by 15 % ? If you re-negotiate with new vendors, you can bring your transportation costs by 5-10 % ?

There is a saying that one bird in hand is better than two in the bush. You must try to get 15 % additional sales from your existing customers and markets, before venturing to get new customers and new market. It will cost you 5 times more to acquire a new customer than retaining your existing customer.

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