Company management, marketing and growth: Intuition versus Method. The infinite challenge
Managing a business involves the continuous effort to ensure business growth. Intuition has always been hailed as the foundation of success, but is it really?
Growth is the primary goal that we all set ourselves in business management. We can be novice entrepreneurs, small shopkeepers, great captains of industry, freelancers or freelancers, but what we aim for is always the achievement of continuous and sustainable growth of our business. But how to create the conditions for growth? How to set up our business management so that the development of our business is not left to chance?
Strategic planning for the growth of a business is often undermined by the daily commitments that fill our agendas and that too often distract us from looking at the situation of our business as a whole. This makes us shortsighted and forces us to leave the growth of our business to intuition alone.
Every day we see large companies and entrepreneurial realities (including personal ones) celebrated as great intuitions, but often this is not the case, indeed these realities are almost never the result of intuition alone. Great professional and entrepreneurial careers are usually the result of a good method!
A good working method, like a good study method, are based on continuous and persistent work that looks far away but plans every little step that leads to the horizon. A good method puts you in a position to learn something more with each step and take advantage of that competence for the next steps. On the contrary, intuition entrusts growth to chance.
A great idea can make you take a big leap, but a good method can make you take many small steps every day far outstripping the growth brought about by the single good idea. Furthermore, a good method guarantees continuous and organic growth, the fertile and ideal environment for the birth and maximum yield of intuitions!
But what is a good method?
The best and simplest I have learned to date is what is often referred to as the "Circular Method" and is divided into 6 simple steps : Analyze, Hypothesize, Test, Learn, Improve, Repeat.
- Analyze: in this phase you select the "field" in which you want to grow (turnover, revenues, number of customers, average receipt, average number of products per order, personal free time ...) and analyze the information in our possession. in order to have a precise picture of the situation linked to the specific field of growth.
- Hypothesize: once the analysis is finished, it is necessary to set a precise goal to be achieved, a hypothesis of what is believed to be achievable. The hypothesis must obviously arise from the results of the analysis previously performed.
- Evidence: the implementation of the hypothesis to try to reach the set goal. In short, get to work! At this stage it is important to remain firmly attached to the plan envisaged by the hypothesis.
- Learn: at the end of the operational phase (Test) of the implementation of the hypothesis it is necessary to verify what the results of the hypothesis were and to understand what went well and what went wrong, what could have been done better, what worked and what it did not work.
- Improve: We apply what we have learned to the hypothesis to look for a more truthful "prediction" and more sensible goals.
- Repeat: once we have reached the improvement objective we set ourselves, we start again from the analysis of a new "field" or the same to set up updated objectives, try, learn...
A good working method allows you to fully understand all the variables that contribute or oppose the growth of your business.
A practical example
I am an entrepreneur at the helm of a retail business of organic soaps and detergents for the home and the person, I have a good loyal clientele who buys an average of 1.2 times a month in the store but I would like to be able to increase the frequency of purchase in a way to reduce the time between one purchase and the next, thus allowing me to improve incoming liquidity and have the opportunity to increase sales.
- Analyze: from internal analysis I discover that on average each loyal customer buys 1.2 times a month and that the average receipt is € 42. Usually 50% of the monthly revenue is produced in the first 10 days of the month and then gradually decreases up to end of month. Among the various products that I sell there are some (let's assume that they are called: Bal, Bil and Bol) that I sell in small quantities but always in combination with products with greater turnover (the products: Max and Top).
- Hypothesize: there are 2 areas I can work on, one is pricing (pricing strategy) the other is product communication.
If I create special offers on Bal, Bil and Bol only in the third week of the month and communicate them effectively to my customers in the first 10 days, I will be able to make customers come back more frequently to take advantage of the offer and at that moment try to sell them too. Other products. In this way I could reduce the value of the average receipt (I don't expect the second purchase to be the same value as the first) but significantly increase the number of average monthly purchases of my customers.
- If 100 customers make an average of 1.2 monthly purchases of an average value of € 42 today, bringing me € 5040 to the cash desk and I manage to raise the monthly purchases to 1.7 by lowering the average receipt value to € 32, I can take a good € 5440 to the checkout. '8% more.
- Proof: I carry out the hypothesis for 3 months.
- Learn: after 3 months I pull the sums of my business, discovering that I have managed to raise monthly purchases to 1.5 by lowering the average receipt value to € 35, bringing in € 5250 or about 4% more. The Bal, Bil and Bol products attracted some customers to come back for the offer but sometimes only to take advantage of the discount and not in the expected percentage.
- It gets better: maybe the simple offering on Bal, Bil and Bol products was weak and next time I need a bigger hook that pushes more customers to come back. Perhaps by linking the offer to the purchase of another more interesting product such as Max or Top.
- Repeat: I resume the analysis from the beginning and start testing again.