Being Choosy is Being Profitable

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Being Choosy is Being Profitable

There was a lot of talk about Insurance in this political season. Insurance companies decide who they will cover. For example, in Florida, insurance companies decide who they will offer a home owners' policy. In Healthcare, the insurance company decides, not only who they will cover, but what they will cover. This maximizes profits for the insurance companies. Maybe this is a model that CLECs and ITSPs should look at.

In a small way, fiber companies and MSOs have a similar strategy, but it revolves around fiber build-out and three year payback models. If the customer can be profitable to the carrier in three years, then the company will construct a fiber route to his premise. If not, either pay for the construction or find someone else.

Being choosy and able to say No is significant. Right now, cablecos wants a signed LOA before quoting out a prospect's site. If the prospect doesn't like the letter of agreement (that closely resembles a servcie order), no quote from Cox. The prospect is flummoxed. There is a reason that companies have policies and one of them is to be profitable.

Recently, I spoke with a Hosted PBX company exec about the difference between a CLEC sales approach and the HPBX company approach. The CLEC was working on lower margin while grabbing market share. The CLEC has access to the capital to win deals on lower margin. The HPBX company wants to maintain margin, but doesn't like losing deals. Either you chase market share or you chase profitability.

In some ways it is a public versus private debate. Public companies don't have the same objectives or metrics that a private company does. Public companies have more access to capital, but are slaves to the transparency and need to maintain a share price. This mindset is anathema to many private companies struggling for growth amid cash flow and capital issues.

I am a big proponent of selective selling for a couple of reasons. It is more profitable to be selective. The take-away close - the idea that someone can't have your service - works in more often than not. It is easier to create a value statement or USP for a target audience. It is also cheaper to market to a target audience as opposed to the general marketplace. Learn from the insurance industry - be picky about who you target and sell to.

Over the years, I have advised clients about Lit Building strategy. Still, many service providers do not have a procedure, process, strategy or plan to sell deep into a building that already contains a customer. Gone are the days of sales territories. However, as CLEC's begin to sell EoC and multi-location deals, they will learn that they will have to say no. They will say No to single location deals (if they are true to their multi-location strategy.) They will have to be picky about what customers they chase with 30, 50 and 100 megabit EoC offerings, since there are factors like distance and copper pair counts that affect the ability to deliver service. Sales departments will need to get more selective to be profitable.



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