Roy's Blog

December 12, 2016

Put your money in the rare customer who loves you back

If you accept the proposition that anyone who is willing to pay you for a good or service is worth paying attention to, then any customer is good your business.

Right?

Maybe not.

Some customers produce revenue for you, but the emotional and financial costs you incur to generate it are unreasonable.

Some customers are more of a hindrance than an asset.

These are low or “no value” customers who should command an investment proportionate to their worth.

Many organizations that I have experienced have difficulty scaling the level of investment they apply to the value of the customer. They assume that “a customer is a customer” and therefore apply the same effort to satisfy each one of them.

They treat all of their customers the same way; the highest value customer receives the sale level of service, for example, as the no-value one.

Or, they actually provide the no-value customer premium benefits that high value ones don’t enjoy. My favourite example of this are the promotional incentives offered to lure customers away from their current supplier. “Come to us and receive 3 months free service” or “Switch to our product and a flat screen LED TV will be yours” are commonly used offers when an organization wants to add new customers.

The costs of acquiring a new customer are significant, and are often incurred for a customer who spends virtually nothing with their new supplier or they switch again when a better offer comes along leaving unrecoverable investments in their wake.

Furthermore there is unintended collateral damage from this type of promotion. Existing customers discover the special offer is available, but not to customers who may have been with the organization for many years and demonstrated their loyalty many times over. These disenchanted “loyalists” voice their displeasure to others and often switch to another organization they believe will treat them more fairly.

High performing organizations invest in customers who will provide a decent return on that investment. The higher the value, the greater level attention and resources applied.

And the more favourable treatment given. The highest value customers receive the better levels of service and any new promotional offerings. Check out The Grateful Dead who understood this.

No-value “promiscuous” customers, on the other hand, receive a “no frills” level of service and no special treatment.

Every organization has limitations on the resources they have available for their customers.

You can’t afford to be all things to all people even if they are your customers. It’s just not a responsible thing to do.

No two customers are alike; no two customers create the same economic value for you.

Determine the ones who make your life worthwhile.

Focus on THEM; leave the “bad ones” for someone else to chase.

Cheers,
Roy
Check out my BE DiFFERENT or be dead Book Series

Recent articles you might like
How to build a customer focused culture for your startup
The only 5 analytics you need to run your business
33 leadership principles I didn’t learn at school

  • Posted 12.12.16 at 04:28 am by Roy Osing
  • Permalink

Feedback

To share your thoughts, please contact Roy.