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How Vulnerable are Your Customers? (part 6)

In my previous blog post I described the current situation:  Now more than ever, your customers are being bombarded by competitive offers and even some of your most loyal customers are actually listening to your competitors.

Your customers are vulnerable.  What can you do about it?

The last thing you need to do is consider what would happen if you let go of your most unprofitable customers?

While the vast majority of your customers are most likely value neutral, the real treasure lies in the extremes surrounding the neutral zone as shown in this chart.  I’ve written in the past that not all customers are created equal.  One research study found that 20% of customers created 220% of profits, and Booz Allen Hamilton suggests that as many as 25% of your customers may actually be destroying value.

The top 15-20% of your customers are most likely generating the majority of value and need to be kept at all costs.  Once you’ve figured out how to ensure your best customers remain loyal, the next challenge lies with the Value Destroyers.

One of my clients analyzed their customers and found that a handful of customers were blatantly abusing technical support, calling as often as 35 times in a single day.  While the technology issues that may warrant such a need to call are a significant but different issue, the fact that the maintenance fees could in no way compensate for such high call volume.

You need to figure out how to readjust the value balance, which may include charging more appropriately for the services they use, shunting customers to self-service channels, fixing glaring problems that invariably lead to a customer service call, migrate high-cost sales people to higher-potential prospects, etc. If you cannot realign value, then these customers might just need to be let go.  This is a difficult decision to make, but the simple act of removing a customer from the system might boost profits as they are no longer draining resources. Not to mention the fact that your precious (and fewer) resources will be freed up to better service the Value Creators.

By focusing on these five things, you’ll be able to develop a customer strategy that maximizes profitability as it protects your best and most profitable customers.  By focusing on preserving profitability, you can not only weather the storm, but even thrive as you focus your marketing and sales efforts on your most profitable prospects.  With clear insight into what customers value augmented by enabling technology, you can maintain strong customer relationships and prepare yourself well for the inevitable rebound.

In the meantime, if you would like help in identifying and keeping your best customers, as well as revitalizing sales in a challenging economy, you might benefit from our new Customer Snapshot program.