Strategic Vs. non-strategic expenses

We’ve been making changes to our budgets and expenses over the last few weeks. Some of these are marketing and sales expenses, others are related to internal capital investments. Either way, it has me thinking a lot about how we think about spending money at LOFT. I’d like to offer a couple of thoughts for conversation.

There are two types of expenses: Strategic and non-strategic.

Non-strategic expenses are ones that don’t further our strategy of delivering the best software support in the world and peace of mind to our customers. These expenses need to be regularly pruned.

Strategic expenses by contrast, boost and further our strategy of delighting our customers. For these expenses, we’ll seek to outspend our competition as much as possible. Doing so insulates and protects us from others and creates a desire for customers to do business with us. These expenses are investments in our customers’ happiness.

Within strategic expenses, let’s look at categories that are less likely to change.

Will our customers ever want less security? Worse customer service? Be harder to do business with?

Probably not.

I’ll leave you with this excerpt from Warren Buffet’s 2005 BH shareholder letter:

Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous. When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as “widening the moat.”