Do You Need to Change Your Strategic Plan’s Profitability Focus? - dummies

Do You Need to Change Your Strategic Plan’s Profitability Focus?

By Erica Olsen

Strategic planning is often about doing what you’re already doing but tweaking it slightly. Sam, the owner of a chain of regional retail auto parts stores, thought his focus should be on profit per store. Although the profitability of a particular location is crucial, profitability isn’t the only variable that counts. As a result of understanding what makes a good profit engine, Sam discovered that looking at the profit per customer is an even better measure of profitability. Now instead of stores competing, they collaborate.

Sam now provides a far superior customer experience than his competitors because stores aren’t fighting for customers. Customers get appointments quicker, and their cars are repaired faster. Also, Sam can share assets, such as people and parts, between all the stores. Sam’s improved customer experience is a newfound competitive advantage. His scope of services isn’t matched by any of his competitors.

In this case, you can see how looking at profitability by customer instead of store can be a competitive advantage. The retail store now makes decisions that support the customer being the profit center instead of the store. Having a single focus on profitability can help hone your attention when trying to identify your key areas of uniqueness.