Innovate and Re-Package Your Products and Services
And watch your customer retention and profits improve!
Chia-Li Chien | Oct. 17, 2011
What do you think is the most innovative company out there? My answer is “Apple!” Most of Apple’s competitors are basically following Apple’s lead in consumer electronic and technology trends. This allows Apple to set future trends— which means they continue to keep a majority share of the market. The recent big news of Google’s agreement to acquire Motorola Mobility has the industry worried about the mobile market share, but Apple does a lot more than mobile. It’s their innovative products that keep their buyers loyal and interested.
If you study Apple closely, you may begin to wonder if they actually create a new product each time. Or, do they take what they currently have, add new features, and then re-package them? In small business, we too must constantly innovate our products (including services), regardless of our market space. You can either lead the trend or adapt to what the market is telling you. However, many small businesses overlook the opportunity for Re-Packaging. Re-packaging is a type of innovation of products (including services) that most entrepreneurs miss.
We also all understand that new client acquisition is one of the most costly pursuits in business; however, without the right client retention program in place, you will lose them, their dollars, and the dollars you put into acquiring them, to competitors very quickly. So to lower your client acquisition costs (this is one of the value drivers for business), you should have 1) an innovation process to create new products and 2) a process to re-package them to leverage all four-types of revenue.
There are four types of revenue every business must deploy in order to create value in business.
• New business
• Repeat business
• Residual income (or retainer or continuity program)
• Non-residual income (or licensing or joint venture)
New Business – This is the typical revenue generated by your business. For example, if you build houses for your clients, that is your regular revenue business. If you sell pool products, those products create new business revenue.
Repeat Business – Don’t we all love repeat business from the same clients? We spend so much time and money chasing new clients, but retaining them is key. Building a loyal customer base gives you more time and money to streamline and improve your customer services, which improves your customer loyalty ... which gives you more ... well, you get the picture.
Residual Income – If you sell auto insurance, your policyholders pay their premiums each year. When they renew, you receive the residual income without really working too hard, except to maintain that relationship. That is residual income.
Non-Residual Income – If you have a virtual sales force, chances are you will have non-residual income. For example, if you’re in a multitier marketing business of let’s say, vitamins, when your downstream salespeople sell products, you get the non-residual income. But to ensure they continue to sell on your behalf, you have to maintain the relationship and continue to offer sales support to them. But you don’t actually have to sell the products. Franchise businesses and software licensing are similar in this way as well.
Many businesses focus on growing in revenue. That is great, but often they fail to also focus on growing in value. At the end of the day, your bottom line should be representative of the value you will walk away with at the end of your time in the business.
David and Judy (not their real names), own a two-partner software company specializing in the green energy sector. For the past seven years, they have felt like their profits were in decline. When I asked them to honestly review past projects, they admitted that they lost money on most of the projects. Perhaps it was due to inaccurate estimates, plus a long sales cycle.
As I examined their industry competitor trends and how to position their services in this niche field, I took them through the re-packaging process. This process took their current service components that matched and aligned with their core competencies. In addition, they needed to intentionally shift focus to “what matters the most to clients.” Together, we came up with three types of packages; each package is nothing more than re-packaging several core service components. Each package is geared toward a specific client’s wants and needs that drive results.
In this re-packaging process, new pricing emerged that leveraged all four types of revenue mentioned above. This re-packaging process allows them to 1) protect their profit margin goals 2) focus on up-selling to their existing client base 3) achieve high client retention and 4) stay focused on the vertical niche new client acquisition.
Even though David and Judy did not have a beefy budget in research and development like an Apple does (not to mention the brand recognition) they were still able to take the opportunity to innovate their products and leverage that opportunity to rekindle relationship with their past clients. This relatively simple re-packaging process yielded a tremendous market share they did not expect.
“Don’t leave the money on the table!” is often something we hear from other successful business people. Are you leaving any money on the table? Don’t look for the economy to turn your business bottom line around—you must get in innovation-mode. You must take action to innovate your products. Perhaps simple re-packaging is all you need to find your way back into your market’s mainstream and start building value in your business today.
Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li "like JOLLY!" Passionate leader of small business strategic value creation & implementation Mastery. She is CEO& chief strategist of Value Growth Institute. Creating business value that transforms your world. She is the Award-Winning author of "Show Me The Money" and you can grab a free video of PROFITS MATTER® to grow your business in value at http://valuegrowthinstitute.com/vgi/webinar