Jack's hobbyist customers purchased antique rose bushes each spring, but he had to start rooting plants months earlier. How was he to determine what buyers would want in advance?
Jack had a passion for roses. His passion wasn’t just any roses, but what the rose industry calls antique roses. Antiques are the rose royalty whose provenance or lineage goes all the way back to a “mother bush” in England or Europe. Jack’s passion led him to one of the most complete collections of antique roses in the United States. He turned his passion into a business.
The typical rose lover pores over color catalogues all winter, then purchases rose plants for the spring planting after the danger of frost is past. The rose plant seller must start the cutting and potting process months before the orders are placed and the plants shipped. The problem was that a variety in vogue one year might not be the big seller next year. If Jack grew the wrong ones, they had to be destroyed at great cost For years Jack kept careful records of what sold to predict future sales. But his log wasn’t good enough. How could Jack determine what buyers would buy months after he selected varieties to grow?
We initiated a step in The Profit Process called the Customer Advisory Board, in this case, The Rose Club. The Rose Club consisted of Jack’s premium customers—the ones who purchased regularly and often. The club operated by invitation only (exclusivity has its own appeal) through two or three conference calls in the fall and winter. Its purpose was to set up a two-way conversation with trendsetters across the country. The Rose Club eventually led to The Rose Letter, a newsletter that was sold on a subscription basis to all customers. The newsletter announced the most anticipated varieties based on information gleaned from The Rose Club members. Spotlighting the most anticipated varieties fed more demand for those cuttings. In this way, the available information allowed the production cycle to match the demands of the marketplace.
The many problems of a business often mask the most basic problem -- knowing what the customer wants. The Customer Advisory Board, if planned and executed properly, will tell you what your best customers want and are willing to pay a premium price for. Every business has a limit on capacity. The challenge is not just to enlarge that capacity to pursue mythical economies of scale; i.e. lower costs. The real challenge is to use and sell your existing capacity at a premium price and therefore a premium profit. You can’t do this without up-to-date information on what the customer wants. The best place to go for that information is the best customers you have.