Profit by Design

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Profit by Design

Do those words actually go together – yes, they do. Businesses need to make a profit, so the business can continue to deliver value for its customers, and provide a return for the investors. Even if you want to start a non-profit, or an organisation that can be classified as a charity – you still need to make money (profit) to continue the good that you want to do. We need to be comfortable with that. Profit is not a bad word, it is means that allows businesses to survive, for entrepreneurs to commercialise their ideas and for business owners to have a decent lifestyle.

Most leaders of start-ups and businesses put effort into developing their idea, building a team and/or attracting investors. You may use the Business Model Canvas to ensure you have all the boxes checked for your business model. But when it comes time to launch, it’s always: “sell as hard as you can..!”.

The danger here is the focus on revenue versus profit. Sales for the sake of making a sale.

We need to design the business for the outcomes we want, profit.

We need to engage with customers with the outcome in mind – not a closed sale, but a relationship opened and an advocate created.

Profit by design is about applying business design principles to realise two goals from the customer-side of the business:
1. We attract and keep the customers that get the value we deliver (because these are the most profitable to us).
2. We attract and keep the customers who become our advocates and promoters.

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The Architecture for Customer Engagement is the framework or blueprint I use to achieve these goals, but you can use any model you want, as long as you are guided by the key principles behind Profit by Design.
Profit by Design key principles:
• Revenue and profitability for any business comes from customers
• Your customer portfolio is the key determinant of your business profitability
• Most businesses have a customer portfolio configuration that has, roughly, 80% of profit coming from 20% of their customers – and conversely 80% of their customers only contribute about 20% of profit back to the business (for some businesses it is pushing 90/10..!)
• Organisations create customer portfolios like this through an obsessive focus on revenue and are deceived by the eight-great misleading traditions of sales
• Not all customers are equal – in how they gain value from your business and in how they reciprocate that value
• Different customer groups represent different value to the business – from a profitability perspective and from their will to be advocates
• Your customer engagement should be about attracting and keeping your awesome customer – the ones where there is a mutual Two-Way Exchange of Value
• Your customer engagement is not about closing sales but opening relationships with promoters of what you do.

Mark Hocknell Architecture for Customer Engagement 2016

An overview of the Architecture for Customer Engagement

The Initial Inputs
• This is about identifying your awesome customer groups and getting your value proposition right for those customer a two levels (why you and then about what you do)
• Adoption – knowing what customer-market you are in – early adopters, the majority ?- is a big factor in how you find your awesome customers
• Align your values across the your engagement approach with your customers – people buy emotionally, then seek rational information to support that decision.

Secondary Stage
• Once the initial inputs are figured out, we then need to understand how your awesome customers make decisions
• Then we align the optimal engagement activity to support the goal – congruence across the engagement activity

And the Goal is: to open a relationship with your awesome customer where there is that optimal Two-Way Value Exchange

The Result is: profitable customers who are promoters of what you do.

Act – execution/implementation. Stop designing and get it done. Once you have implemented you can start learning more about what is working.

Measure / Monitor – Measures give us feedback on how we are achieving our goals and results. Design performance measures to give you meaningful feedback on how your implementation went, and how accurate the design of your engagement activity is. Learn, finetune, progressively improve.

Engagement Design, Act, Measure/Monitor, Learn/Finetune Design, Act, Measure/Monitor, Learn. Repeat and repeat.

Pay attention to how you design your business model for profit – by attracting and keeping the customers that will get the value you deliver, and will reciprocate with financial value and advocacy.

(Images by Mark Hocknell)

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