“MARGIN is oxygen and sustenance – Protect it!” That’s the essence of the latest Mario Pretorius Tip. Margin, he says, absorbs mistakes; generates emergency cash; allows bargaining room. It is the lifeblood without which “bells toll and gravediggers gather” he warns. GK
Protect the margin first.
Then boost the turnover. Margin is the buffer for learning and mistakes; it necessitates the ability to sell on quality; it rewards in the bottom line.
Margin Protection is the one principle that most marketing strategies and marketing textbooks dismiss. The economic thought (ever so unscientific) is that dropping prices will result in higher sales – as if this is some force of nature, and as if economics is a science.
This is not so. “Value” is an ephemeral concept – defined in the customer’s mind by your unstinting effort (aided by a mega host of competitors), and your customer will equate a witches brew of emotions, prejudicial mumbo and hard-wired, hormonally influenced pseudo thoughts into a single “Yes – mine!” or “over my dead body never go away!”
Chomsky said it best: Business consists of selling goods & services to Irrational people making Uninformed decisions.
Price is dangerous. It ratchets down, not up.
Margin is all important. If something has to cave in to margin protection, it must be cost. Margin is THE most important part of your business to go to war for; to sacrifice and to break down into re-invention for.
Without adequate, growing margins, there is no heavenly dew sprinkling the soft cheeks of success in her growing years. Margin allows mistakes to be absorbed. Margin allows emergency cash to be generated, it allows bargaining room, and it is oxygen and sustenance. It allows Spa time for tired ideas, infusions of lifeblood because you can pay for it, providing your costs are curtailed and in check.
Margin is the lifeblood – the decisive factor when choosing between siblings for sacrifice, the go-ahead for new ventures. Without proper and industry-beating margins, the bells toll and the grave diggers gather to inter the idiocies of price cutting instead of quality enhancing. Beware.
This tip is an extract from the manuscript of “The Unconventional CEO: Common sense outside of conventional Management thinking” (by Mario Pretorius).
