Bad Profits vs Good Profits?
Is profit the only real measure of business performance? And if it is, is there such a thing as “bad profits” (versus Good Profits?). I contend that there most certainly is. And bad profits might sustain a business in the short or, even, the medium term. But in the long term, it is only good profits that will win the day.
Fred Reichheld, in his book The Ultimate Question (2006), had it right when he talked about good and bad profits and how the pursuit of good profits was the route to sustainable growth.
"Too many companies are addicted to bad profits, profits that come at customers’ expense and drain the value out of customer relationships... Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value... A company earns good profits when it so delights its customers that they willingly come back for more and not only that, they tell their friends and colleagues to do business with the company. The right goal for a company that wants to break an addiction to bad profits is to build relationships of such high quality that those relationships create promoters, generate good profits, and fuel growth."
So might I respectfully suggest you examine your company’s profits and form a view on whether they are “good” or “bad” profits – the answer might surprise you but, whatever that answer is (and providing you are brave and bold enough to act on it if it is “bad”), it will help sustain you (and your business) well into the future.
Brian H Meredith
Comments
Post has no comments.