I’m talking about your existing customer database and the treasure that lies hidden there, waiting for you to discover it.
Any business operating for more than 12 months will have built up a list of customers that have been served. Hopefully, information regarding these customers has been kept in a format that allows for easy analysis and collation.
Reviewing and classifying customers into categories allows for further refinement of your targeting and marketing for sales purposes.
There are various ways of categorising your customers. Let’s stick with the tried and true A, B, C and D.
It helps, when analysing your customers, to think in terms of what you consider to be an ideal customer. Here are just a few attributes of what would define a great customer:
You may also find that your ideal customer has purchased a broad cross-section of your services and products, or may be open to purchasing them. Don’t be surprised if you only find a small percentage of your customer database matches this profile.
That’s okay. The fact that they do exist should inspire you. Now, your challenge is to grow the percentage of your customers that are A types. In a lot of cases those few ideal customers generate a sizable portion of your revenues. Just imagine if you doubled the amount of ideal customers you had on your database….
By identifying what an ideal customer looks like you’re halfway to being able to snare some more.
These customers make up the next echelon down from your ideal customers. B type customers can be, with the right game plan, elevated to A type customers. Sometimes the only difference between A and B type customers is the amount they spend with you. This may be remedied by something as simple as educating them on your full range of products and services.
Perhaps you’ve spent more time on introducing new or existing products to your A type customers and ignored doing so with your B type customers. These customers could be buying a substantial amount from you, however the types of products may not be as profitable as they could be.
These are still customers you want on your database and deserve further attention.
Again, as with the B type customers, these customers may be moved up to become higher level customers (Bs) over time. This type of customer may not buy as much and requires more of your time to service. Overall they’re not as profitable as the two top levels of customer. Still, they provide a solid base for your business and you may be able to grow revenues through planned activities that focus on building the relationship.
Typically servicing these customers takes up an inordinate amount of time and energy. They take a long time to decide on purchases, they’re quick to change their mind, they complain frequently and they are often slow payers.
I’ve seen client databases where D type customers account for 80% of all business.
The businesses servicing these customers spend the majority of their time dealing with their demands. Often the profit realised from this customer segment does not justify the time and effort expended. Some of these customers may be moved up the ladder to become C type customers. However, it is a far better use of your time to be actively seeking A or B type customers than looking for more of these troublesome customers.
You may want to actively dissuade them from doing further business with you by instigating a minimum purchase policy – the purchase needs to be made up of profitable products. You may even consider winding back service levels.
How do you deal with D type customers? Leave a comment on your approach, I’d love to read it!