My Son the Scholar

I started a blog with my son and he has developed into a full-grown blog-hog demanding full editorial rights over my gray haired advice. After all, as he explained, he does have the PhD. Rather than argue, I will rip off his copyrighted stuff and link to it and make my comments on my own blog. His stuff is really pretty good.

The focus is on customer relationships and profit maximization. Yeah that’s right, he wants to focus on extracting the maximum profit while keeping customers happy. As a matter of fact, I tend to agree the only socially acceptable profit is the maximum one. It rewards the creators, workers and investors of the best companies and makes them even stronger.

In his first blog, he points out the focus will be on “customer strategies and how to maximize business profits. These are topics that the whole world seems to know about, but few understand really well. The problem is not too little information, but too much is based on false premises or dated analysis.”

Throughout our careers, we have both studied classical economics and management theory and have found that neither works particularly well in the real world. The more that knowledge becomes a commodity, the more that business profit maximization will be customer-driven. You can create a profitable business without really understanding economics, but you better have a strong understanding of your customers. Hopefully our thoughts and experiences will be useful to as you look to build a sustainable and profitable business.

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45 Responses to “My Son the Scholar”

  1. Andrew Says:

    Glad to see you have found your own voice! I am not sure that I would fully agree that the “only socially acceptable profit is the maximum”. There are a few lessons that we need to take away from Enron. Also, I think you need to further explore “maximum”… Surely you are not talking about maximizing profits within a fiscal reporting period, but rather over the lifetime of the customer?

  2. John Says:

    The sentence before uses the phrase “extracting the maximum profit while keeping customers happy”. I doubt that Enron has any happy customers or for that matter any customers at all. I believe it is more than maximizing the profit over the lifetime of the customer but maximizing the profit for all customers in the product or service group. Also, I believe in the book “Re-engineering the Corporation” there are caveats about not working with miserable customers or suppliers and I think this is also a consideration. I do not believe that attempts should be made to maximize the profit relative to a particular customer at the expense of the group.

  3. Andrew Says:

    In an post last week on my blog, I talk about firing your customers (http://strategyst.com/wordpress/2006/09/28/fire-your-customers-if-they-misbehave/). So, if I undertand what you are saying here, keep the customers that are profitable, and get rid of the ones that are not. I get that, but how do you address the measurement issue — particularly in a public company with earnings pressures — in what timeframe should you expect profits from a happy customer? Inside a quarter might not be possible, but inside 5 years and you are out of business.

  4. Strategyst » Blog Archive » Lifetime Value Says:

    […] An exchange with my Dad over at BizMaster got me thinking about measuring customer lifetime value. In my experience, most companies (other than contract based service companies such as telcos, isps, cable, publishing, etc) don’t really have a good handle on measuring the lifetime value of a customer. When I was working in market research, we did a study for a mutual company that found that it would take several hundred years for one of its customer segments to become profitable. Now that I am in software, I often hear things like ” I have been a loyal customer for 7 years… you need to patch your buggy software”. When we investigate, we find that the customer has just upgraded from Win98 and can’t get our 7 year-old product to work on the latest version of MS. In fact, we ended support on the damn thing three years ago. We then have to explain that buying one product seven years ago does not make them a loyal customer — in fact, we don’t even count them as an active customer at all. Perhaps they should upgrade? […]

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