Jonar Nader says that cost-cutting is foolish. He wants executives to learn how to charge customers more, so long as each customer is willing to pay more, with pleasure. In this video, Jonar explains why CEOs are often misguided when they call for an increase in revenue.
There are two videos below. The second one is of a higher quality for those with high-speed internet connection. The first video is 12 Mb. The second is 22 Mb. Video length is 6 minutes and 46 seconds. Further below is a transcript of the video.
Here is the transcript:
Host: Talk to us about losing friends and infuriating competitors. Can we believe him when he says that cost-cutting is for wimps?
Host: Let’s find out. Would you please welcome Jonar Nader.
Jonar Nader: Thank you, Sue. Hello, everyone. Try and complete this sentence. In life, those who are content are the richest of all. Would you have said that? In life, those who are content are the richest of all. Now, complete this sentence. In business, those who are content are sitting ducks. I would like to speak with you today about infuriating your competitors and if I ask everyone in your organization who is your number one competitor, would there be consensus? Would you agree? And then if I asked what are you doing about it, would they all know?
Do you think you can infuriate your competitors? What would be the biggest slap in the face you can think of? You know, people used to say, ‘Oh, we worry about a competitor coming in and slashing prices.’ I mean, that would be a bit of a slap in the face, wouldn’t it if your competitor just slashed prices and all the rest of it? But wouldn’t the trump, the ace be that if you could infuriate your competitors by not slashing prices but by charging more for your products and to top it off, your customers actually are delighted to pay more. But there are conferences going on all around the world. And I’m going to take you to one of them. And I bet you, it’s a 99 percent replica of everything that’s going on right now in any other conference.
But you can just start off by saying this. Welcome to the conference. And all the staff members will take out a piece of paper and they’ll start writing because the boss is about to deliver the annual objectives. And what are the annual objectives? What are the priorities? And the first priority, guess what it is. Always at any conference from any CEO about any next year priority. Listen up. Yes, listen up and increase the revenue. Why do they do this? Because they know that in business, if you’re content, you’re a sitting duck. But I don’t think they do this correctly because we don’t just want to increase revenue. That’s where you fail. What we want is to grow.
Now people know that growth is important. If you have a tomato on a vine and apple on a tree, anything in the world must grow but corporations have lost the touch of growth and they stretch and expand. And so they don’t say, people, let’s go grow together. They say increase the number. By hook or by crook, you have to do it. And what happens when we do increase the number instead of growing? When we stretch and expand instead of growing, what happens? They want more next year, that’s right.
But in any study you do, in any general – if you’ve attended Harvard, if you’ve attended all the MBA programs, you would have done case study after case study that shows conclusively that any corporation that has a fantastic increase in revenue suffers from what? A dipping profit. Now the CEO knows this so the CEO will say, ‘The second priority ladies and gentlemen is very important that we increase profit.’ Now, they just put that up as words, you know. They’re just words because we know that by that first objective, profit is going to dip. But it can’t because I’ve told you you’re not allowed to dip it. So there you go. That’s your objective. Go back home and make sure you increase profit.
So now you think to yourself, how on earth am I going to do that? So, the CEOs thought it one step ahead of you and we’ll tell you how to do that because there’s only one of two ways to do it. The other way is too hard so the easy way is let’s cut costs. Would you agree? That’s the third priority of any CEO anywhere around the world. Cut costs. And I’m suggesting to you that any fool can cut costs. Any wimp can cut costs. Will you not pay thousands of dollars for managing directors, marketing directors, sales directors, finance directors to get them in a room to pour out their grey matter and at the end of the day, they say, ‘Well, I think we can improve if we cancel the conference, cancel the ad budget, sack 60 people, close that office.’ Well, any idiot can do that. Why do we pay all these highly-skilled, allegedly qualified people to tell us to close things, cut things?
I mean, by all means, we need cost prudence. By all means, we should take care of not haemorrhaging and not wasting. By all means, we don’t want to leave the tap running, but cost prudence ought to be a natural part of living. Wht must it go up on a screen at a conference? It’s like saying let’s be honest. Oh, so this year we’re going to be honest. But next year, maybe not and last year it didn’t matter. Cost prudence matters all the time. Why is it up there? Well, that’s up there because we have to cut costs in order to increase profit.
And I’m suggesting to you that there is a better way rather than cut costs. Charge the customer more. Now, follow this here. Because of all this nonsense of cutting costs, what does the CEO know is going to happen next? They know that as a result, if we follow this recipe, the next thing that’s going to happen is customers are going to be not very happy. So the CEO puts up the next slide, the next thing that says make sure we increase customer satisfaction because customer satisfaction only goes through the floor because you’ve already cut costs, you’ve canceled and not enough staff on the counter. We know it’s going – so he has pre-empted all this. Now, there is a fifth objective that someone wrote for him or her and they’ve forgotten it. So they’ll run back to their notes and they’ll say, ‘Yes, the fifth priority for the year is – oh, yes. Let’s have fun.’
You’re telling me to have fun? It’s like I’m – you know, it’s like saying I’m about to tell you a joke and it’s very funny and you’ll really laugh. And you think, just shut up and tell me the joke. You don’t pre-empt that. You don’t say, ‘Oh, we’re going to have a great deal of fun.’ I don’t want you to tell me about it. I want to feel it. I want to come to you and say I had fun. Honey, I’m a great lover in bed. Well, shut up and get on with it.
Jonar Nader: Talk, talk, talk. I’m suggesting to you that these priorities that are a fixture of corporate life for retailers and manufacturers alike are doomed to fail and I’m just going to focus on the middle one, cutting costs and I’m going to suggest to you that there is a better way.
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