Balancing act between 'GROWTH' & 'PROFITABILITY'

The balancing act between growth and profitability is not that easy to come to most businesses, particularly in the context of today’s' competitive business environment. Those that manage to do so for a temporary period often get replicated by their peers and competitors. In the bargain, the fragmented or segmented market leaves almost no room for supernormal profits. This holds very true for the financial sector where any hint of callous growth can take a toll on profitability as recently we have seen in last quarter result for SBI. At times there are players lending at very thin margins. This helps them grab market share from the larger players. But their own profitability takes a dip as margins fail to accommodate rising operational costs.

What does enable profitability and growth to coexist is the extent to which both are rooted in customer benefit. The customer benefit of a product or service is not what it is or what it can do. It is the reward that customers receive through their experience of choosing and using that product or service. It often varies by individual and context: the reward one person gets from chocolate is the pleasure of eating it; for another is it the pleasure of giving it as a gift.

‘GROWTH’ not just as ‘extension of the business’, i.e. increase in sales volume, but as ‘TOPLINE GROWTH’, i.e. increase in sales volume and revenue, and as ‘REAL GROWTH’, i.e. triggered by an increase in ‘CUSTOMER VALUE ADDED’. ‘CUSTOMER VALUE ADDED’ means the difference between the total value of an offering and the price the customer has to pay for it. ‘TOTAL VALUE ADDED’ means the difference between the total value of an offering and the total costs to produce it.

How to balance both the activities??? It is not that easy......but doable.

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