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Jan 5, 2019

Make the right choice – take your time

Paul Clapham looks at the benefits of thoughtful decision making in business

“Time and I are a match for any two” (Philip II of Spain). Writers of business advice books would be horrified. They’d be on Charles Dickens’ side: “Procrastination is the thief of time”; their mantra is far closer to ‘do it today’ and other variations on the theme.

At first sight this looks entirely right. To waste time, to delay action is surely to waste opportunities to sell more, to miss out on new customers. In fact, it’s not so cut and dried.
There are genuine benefits to doing nothing or, at least, doing nothing yet. Here’s a simple example. Being the first entrant to a new market looks like the best place to be. Actually, being second or third is more profitable. The early entrants spend a lot on marketing so the third guy doesn’t need to. The third guy knows what the market wants. The third guy can undercut numbers one and two from the off and customers do like ‘best price’.

We all ought to be brilliant at making business decisions, because we make decisions all the time: do I buy this house or that one? Do I buy or lease my new car? Do I choose tea or coffee and a dozen others of like ilk each day. But the fact is that most of us defer decisions as much as we can.

A key virtue in putting off a decision is to be sure you have all the important information. Test drive every car that you might buy, wear out shoes looking at houses. Apply the same thinking to your business. Why should you stock product x? Why does product y justify better shelf space? Who’s giving the best retailer support in product sector z?

An entirely virtuous statement to a sales rep is, “you will have to have a world class reason for me to change my regular suppliers or how I merchandise my store”. They might have such a reason – good reps don’t even walk through the door unless they’ve got a decent proposition. But you’re not going to do a deal that day, are you? The longer you work that rep, the lower the price gets or the better the package.

So delaying a decision gives you more chance to make a good choice. At the same time this might be simple prevarication. You delay because you don’t want to do whatever it is at all, but you don’t want to admit it.

One important factor in the whole issue of decision-making is what demands time and thought and what doesn’t. When choosing your coffee in Starbucks you decide in seconds, when buying a car you spend many hours spread over weeks or months. As far as I can establish there is no equation that tells us how much time to spend per pound of expenditure, which might help the terminally indecisive to choose. (It might help get a few of them out of my way at a busy bar, too.)

It is a scientific fact that, faced with a complex choice, most people make poor choices. That can include experts – note how many investment trusts continue to attract new money despite poor performance over many years – and you don’t need to be cynical about commissions payable because they all do that.

Has anyone – ideally an independent body or person – researched the sports market and demonstrated that stocking one brand in each sector is the most effective way to grow retail sales – because you attract the best discounts and the best marketing support? Or, indeed, has that been proven to be hogwash? I know of a pet retailer who did exactly that with petfoods, stocking only the Pedigree brand. He increased both turnover and profit from the sector.

Might the same work in sports goods? To an extent it already does work. How many sports shops stock more than one brand of tennis ball, or table tennis ball? If that’s you, then you can make it work in other product sectors. It demands some courage and your suppliers have to be supportive, not just at the outset but long term, but it’s one route to more profit.

When Aldi were first getting established in the UK, their CEO was quoted in the Times saying, “Choice is expensive”. That applies to the retailer and his customer alike and it’s clearly true. Three choices of a given product means three deliveries, three stock-checks, three reps’ visits, three orders, three sets of returns etc. All of that is stealing your time away from talking to customers on the shop floor, making sales. It also cuts back your chance of achieving volume discounts.

So the rule of thumb is simple: if in doubt, don’t. Doing nothing might be a bad decision if you end up missing the commercial boat, but rushing in where angels fear to tread is far worse.

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