Lock in your best customers, while locking out your competitors!
At a time when domestic revenue growth was sliding, and General Electric (GE) was still in the middle of expanding internationally, the company convinced one of their big customers, health-care giant Columbia/HCA Healthcare Corp., which ran over 300 hospitals at the time, to allow them to service all the company's imaging equipment.
Columbia agreed, and not only did GE service their own imaging equipment, but that of their competitors as well.
After making that deal, GE persuaded them to add about all the medical supplies to the deal - most of which weren't even product lines GE was in at the time.
There were two things that happened there. One, they made themselves almost invaluable to Columbia, while saving them millions of dollars in the deal. With one of their greatest customers they had virtually assured themselves of a long-term relationship at a time of extreme competitiveness.
Second, they took away a ton of business from their competitors, adding a large amount of revenue to their bottom line.
What was especially good about it was taking over the service side of the business. Not only did they not have to compete with certain products, but they got the best of the deal by getting the residual side of the business ... by far the most lucrative.
In other words they would not have to build products to compete by selling products once and making money only on that sale. Now they would have the ensuing servicing of those products over a long period of time, without having to invest in making competitive products.
The majority of money is made in the servicing, not the onetime sale. The deal was huge at the time.
So what happened with this huge customer was other companies would still be able to sell their products to them, but not include the more important servicing side of the business, which generated a steady stream of revenue at huge profits. To top it off and differentiate even more, they did it at great savings to their customer. It was brilliant.
We must continually look at the steady, continuous streams of income in the industry we serve in, not primarily making the one-time sales.
IBM (IBM) is another company that has done this well throughout the years.
Other Jack Welch Resources:
Jack Welch's advice to MIT Sloan students
Remember to Sign up for my feed
Sponsored link: The outsourcing every manager requires - Tampa Locksmith
Comment Preview