Is Losing Money All Right If Your Customers Are Happy?

Jeff Bezos, CEO of Amazon, believes it is okay to lose money on customers as long as they are happy. Can this work for small businesses, too?
Getting Small Businesses Unstuck, Shafran Moltz Group
April 15, 2013

To Jeff Bezos, Amazon's CEO, this is an acceptable proposition. He believes that taking care of customers over immediate company profits can be a money making strategy. Michael Mayday of Tech.Blorge reports that in his annual letter to shareholders, he stated, “When we’re at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices and increase value for customers before we have to."

This may be a mantra for a billion company like Amazon, but can it work for a small business? Maybe. In the short term and on an individual basis, it is critical for the customer to be happy regardless of a profit on that transaction. A satisfied customer will be an annuity stream for a company and a become a loyal marketing machine. However, in the long run and over an aggregate of an entire customer base, a company can’t continuously provide excellent service and lose money on every transaction. That is a formula for going out of business.

The key is to ensure gross margins are high enough that the company has enough profit to offer great service, satisfy a problem customer and still make money on an monthly basis.

[Tech.Blorge]

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Getting Small Businesses Unstuck, Shafran Moltz Group