As a business owner, I am sure you have heard or thought at some stage that "Every customer is a good customer". After all, every customer puts money in the bank and keeps you busy, especially when things are quiet. Right?
Wrong. Be very wary of this approach - it's a trap. If you run your business this way, you will be creating a lot more headaches than you want, and will be disappointed with your profits (or lack of profits!). Let me explain:
If you think about all your customers over the last year, they will basically fall into four types:
A customers
This customer values your service, and is prepared to pay what you ask. They don't argue over price and value your service and quality. They are raving fans of your business and tell others so. Very loyal, they repeat business with you regularly and won't go elsewhere. You often get referrals from them.
B customers
Most of your customers are B customers. They appreciate your service, but are a little more price sensitive. You need to work a bit harder to keep them, but they are still good business.
C customers
Not very loyal, they will haggle over price and will shift if someone else is a little cheaper.
D customers
Impossible to make profit from, they are always complaining - something is always wrong with your product or service. Often to get the bill paid, you have to argue and sometimes reduce the bill. They never pay promptly either, and take a lot of your time sorting out their constant whining and complaining. Keeping them happy is almost impossible because they always seem to come up with some new problem or complaint.
Warning: If you are getting a lot of D type customers, you are either accepting too much of the wrong kind of work, or it could be a sign you have poor systems for quality and customer service - which is a whole different problem in your business (and you will need to fix these issues first).
Once you have identified your customers, now you need a strategy for dealing with them.
A customers (A = Awesome)
Really look after them. Go above and beyond with exceptional customer service. Keep in touch. Let them know what you are doing for them; let them know what else you do and look for new ways to add further value to them. Tell them how much you appreciate their repeat business. For every referral you get from them, make sure you recognise it with a personal thank you note or gift. They will reward you with more of the same.
B customers (B = Basically sound)
You want to turn as many of these into A customers as you can. Treat these like A customers by making sure they understand and appreciate how and why you do things. Keep in touch regularly and get feedback from them on what they like and don't like about dealing with you. Then work on improving your service.
Tell them how important it is to you that they get the best service. For example, if you are a plumber you could explain why you test the fitting to make sure there are no leaks, why you use a certain grade of fitting, and why you won't use the cheap nasty ones that leak and will cost them more money in the long run; remind them that you are a Registered Master Plumber which means that you have a standard of work they can rely on.
Again, once the job is finished, thank them for their business. For a larger job, go all out with the thank you gift - I guarantee you that your customers will be blown away by this gesture, especially if it is unexpected. Sending a thank you is a tried and true approach that still works today and a great way of creating very loyal customers who tell their friends how great you are.
Also, these strategies work best when you put them into a system so you don't need to remember. For example whenever you get a referral, a thank you card should automatically be sent; when a large job is completed, a gift is sent one week later; on the job your staff should know to automatically explain to the customer the reasons why you do it the way you do; maybe send a free sample with the invoice if the job is over $1,000, etc...
Due to the nature of some businesses, there may not be a lot of repeat business, but this strategy is still worthwhile. Maybe you build new houses? Remember a small percentage will build again in the future, but more importantly, many will know others who are also looking to build, so are an ideal source of referrals.
There are lots of ways to get referrals but first you need to have happy customers who remember you.
C customers (C = Could do better)
Do your best to turn these into B customers. (Find out what they are really looking for - then you will get a better idea if they will suit your business - in some cases they may not, which is fine.). At the end of the day if they don't respond, don't be too worried. The non responsive customers are unlikely to stay anyway.
D customers (D = Don't want to deal with)
Every business gets a few of these. Get rid of them as quickly as possible. D customers take up all of your time and you will never make any money off them. They will send you broke trying to keep them happy and then they probably still won't pay. Send them to your opposition and let them have the problems instead! Just say something like "We are not really geared up for this kind of work, I would recommend you contact x competition, they might be better equipped. Here are their details. Have a nice day". This kind of approach will work best as it avoids confrontation and means both you and the D customer keep your dignity intact.
Never be rude of course. Just be aware of who you can deal with and who you can't. At the end of the day you are running a business (which your family and your employees rely on to be profitable), and you don't have unlimited time or resources.
It is worth mentioning that I come across a lot of business owners who get scared about letting these D customers go, as they are worried about less sales. If you are still feeling unsure then take a look at recent sales you have had with these D customers and if you are a service-based business, do a quick costing on the job. Include time involved at your hourly rate, cost of extra materials, freight, time spent explaining things to them, etc. Work out how much you lost on the job and then think about what you could have done with the extra time to make more profit in your business. How much did you make or lose on this job?. I'll bet that you actually lost money and are worse off.
The point of all this and the key: is to isolate your A and B customers, find out what they have in common, and use your marketing to attract more of those excellent profitable customers. Ditto D customers, if you are getting a lot of them, ask yourself why they are attracted to your company. What is going wrong in how you market your business?
The truth is, you need to be very strategic with your customers and your business. Get your customer base right, and your business will be much easier to run and you will achieve much better profits and margins.
Task
Wrong. Be very wary of this approach - it's a trap. If you run your business this way, you will be creating a lot more headaches than you want, and will be disappointed with your profits (or lack of profits!). Let me explain:
If you think about all your customers over the last year, they will basically fall into four types:
A customers
This customer values your service, and is prepared to pay what you ask. They don't argue over price and value your service and quality. They are raving fans of your business and tell others so. Very loyal, they repeat business with you regularly and won't go elsewhere. You often get referrals from them.
B customers
Most of your customers are B customers. They appreciate your service, but are a little more price sensitive. You need to work a bit harder to keep them, but they are still good business.
C customers
Not very loyal, they will haggle over price and will shift if someone else is a little cheaper.
D customers
Impossible to make profit from, they are always complaining - something is always wrong with your product or service. Often to get the bill paid, you have to argue and sometimes reduce the bill. They never pay promptly either, and take a lot of your time sorting out their constant whining and complaining. Keeping them happy is almost impossible because they always seem to come up with some new problem or complaint.
Warning: If you are getting a lot of D type customers, you are either accepting too much of the wrong kind of work, or it could be a sign you have poor systems for quality and customer service - which is a whole different problem in your business (and you will need to fix these issues first).
Once you have identified your customers, now you need a strategy for dealing with them.
A customers (A = Awesome)
Really look after them. Go above and beyond with exceptional customer service. Keep in touch. Let them know what you are doing for them; let them know what else you do and look for new ways to add further value to them. Tell them how much you appreciate their repeat business. For every referral you get from them, make sure you recognise it with a personal thank you note or gift. They will reward you with more of the same.
B customers (B = Basically sound)
You want to turn as many of these into A customers as you can. Treat these like A customers by making sure they understand and appreciate how and why you do things. Keep in touch regularly and get feedback from them on what they like and don't like about dealing with you. Then work on improving your service.
Tell them how important it is to you that they get the best service. For example, if you are a plumber you could explain why you test the fitting to make sure there are no leaks, why you use a certain grade of fitting, and why you won't use the cheap nasty ones that leak and will cost them more money in the long run; remind them that you are a Registered Master Plumber which means that you have a standard of work they can rely on.
Again, once the job is finished, thank them for their business. For a larger job, go all out with the thank you gift - I guarantee you that your customers will be blown away by this gesture, especially if it is unexpected. Sending a thank you is a tried and true approach that still works today and a great way of creating very loyal customers who tell their friends how great you are.
Also, these strategies work best when you put them into a system so you don't need to remember. For example whenever you get a referral, a thank you card should automatically be sent; when a large job is completed, a gift is sent one week later; on the job your staff should know to automatically explain to the customer the reasons why you do it the way you do; maybe send a free sample with the invoice if the job is over $1,000, etc...
Due to the nature of some businesses, there may not be a lot of repeat business, but this strategy is still worthwhile. Maybe you build new houses? Remember a small percentage will build again in the future, but more importantly, many will know others who are also looking to build, so are an ideal source of referrals.
There are lots of ways to get referrals but first you need to have happy customers who remember you.
C customers (C = Could do better)
Do your best to turn these into B customers. (Find out what they are really looking for - then you will get a better idea if they will suit your business - in some cases they may not, which is fine.). At the end of the day if they don't respond, don't be too worried. The non responsive customers are unlikely to stay anyway.
D customers (D = Don't want to deal with)
Every business gets a few of these. Get rid of them as quickly as possible. D customers take up all of your time and you will never make any money off them. They will send you broke trying to keep them happy and then they probably still won't pay. Send them to your opposition and let them have the problems instead! Just say something like "We are not really geared up for this kind of work, I would recommend you contact x competition, they might be better equipped. Here are their details. Have a nice day". This kind of approach will work best as it avoids confrontation and means both you and the D customer keep your dignity intact.
Never be rude of course. Just be aware of who you can deal with and who you can't. At the end of the day you are running a business (which your family and your employees rely on to be profitable), and you don't have unlimited time or resources.
It is worth mentioning that I come across a lot of business owners who get scared about letting these D customers go, as they are worried about less sales. If you are still feeling unsure then take a look at recent sales you have had with these D customers and if you are a service-based business, do a quick costing on the job. Include time involved at your hourly rate, cost of extra materials, freight, time spent explaining things to them, etc. Work out how much you lost on the job and then think about what you could have done with the extra time to make more profit in your business. How much did you make or lose on this job?. I'll bet that you actually lost money and are worse off.
The point of all this and the key: is to isolate your A and B customers, find out what they have in common, and use your marketing to attract more of those excellent profitable customers. Ditto D customers, if you are getting a lot of them, ask yourself why they are attracted to your company. What is going wrong in how you market your business?
The truth is, you need to be very strategic with your customers and your business. Get your customer base right, and your business will be much easier to run and you will achieve much better profits and margins.
Task
- Take a look at your customers over the past year and give a rating of A, B, C or D to each one. Then decide how you will deal with each group. Make it into a system that is automatically followed and assign one particular staff member to follow through.
- Look at each group and search for similarities. You will find that your A and B customers will be in a certain location or have very specific needs or a certain income or occupation. This is valuable to know because now you can target this specific type of potential customer! And chances are they will be excellent customers for your business and bring in good profits for you.
- Make a decision to stop dealing with D customers. List who they are and make a clean break.
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