Investors or Customers: Which Voices Matter Most?

investors or customers

Profit is everything, isn’t it?

Business owners, investors, and analysts are all prone to obsess over the profitability of a company. When profits are up, we take it as a sign that all is well. When it’s down, there’s a problem.

This single metric of success is so ubiquitous that it routinely colors decision-making in companies of all sizes. Can you afford to invest in marketing, new equipment or employee development? The answer often depends on the business outlook for the quarter or the year.

A Slippery Cycle

When I worked in public companies, there was an almost comical annual cycle of fighting for your department’s budget every autumn, then spending it as quickly as possible in the new year. Commitments were made and contracts signed in the first quarter, before top management had a chance make any cuts.

Heaven help the manager who didn’t spend wisely and ensure their team’s initiatives could be completed. Come August or even in May, the budget trimming would begin as soon as earnings slipped off target.

This propensity to focus on profit clearly undermined strategic decisions, shifting priorities away from doing the right thing for customers to doing the right thing for investors. Even private companies worship at the cult of profit, placating vocal investors who hold a significant interest in the company.

Sadly, the obsession with satisfying investors’ demands for immediate returns frequently backfires, eroding the very profits they hoped to gain.

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How does this happen?

The booming voices of investors drown out customer concerns. Leaders start to listen to shareholder demands first, forgetting that the reason the business became successful is that it was really, really good at meeting customer needs.

Being customer-focused is not always profitable in the short term. It requires investments that may take months or even years to mature. Does that mean you shouldn’t make them? Of course not. But investors might argue the point.

Earning Long-Term Dividends

Smart investments in keeping brand promises can pay huge dividends over time. The tapestry of bottom-line benefits includes:

  • Lower customer acquisition costs as a result of reduced customer churn.
  • Increased marketing ROI due to improved reputation and brand awareness.
  • Reduced support costs with fewer complaints and problems.
  • Higher employee engagement, reducing turnover and hiring expense.
  • Ability to maintain pricing and avoid discounts due to high demand.

The truth is, being a customer-focused company is quite profitable. So if you have to choose between listening to investors or customers, put customers first. In the end, the financial results make investors happy, too.

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