Customer Segmentation: Get Profitable or Get Lost. Some companies are identifying their least profitable customers and sending them packing by presenting them with slow service or crummy pricing. Boston Globe reports in Facing their demons by Bruce Mohl. [Up2Speed]
Every customer can be a profitable customer, and I am appalled by the suggestion of giving unprofitable customers slow service or crummy pricing just to get them to leave. It is more appropriate to refer them to a strategic partner than to treat them badly.
What do you think happens when you treat any customer badly? It it is not fully clear to you, then let me ask; what did you do the last time you received poor service?
When a customer receives poor service they tell up to 9 people how poor it was. Of course the story gets more animated each time they share it, and by the time it reaches the 9th person you have really made a mess of things. Most often, these 9 people share this experience of poor service with 4 others. At least that is what the experts say.
Now can you afford to irritate or even turn away 36 prospective customers to get rid of one who was unprofitable. You not only will make the one leave, but they will become that much more unprofitable as their associates will stop or never buy from you.
It is more powerful to use lessons learned from unprofitable customers to do a better job at segmenting and targeting profitable customers. I cover mapping and segmenting customers in How to Classify Customers and Identify Profit Centers for Your Business -- it is vitally important to understand who your customers are.
I think it is very important to pay attention to your most profitable customers as I describe in How to Increase Your Profits by Cultivating Your 'Top Ten Percent' -- but never, I repeat, NEVER disrespect your customers at any level of profitability. You really don't know they aren't testing the waters and could do more business with you if asked.
The best approach to handling unprofitable customers is to sit down with them and explain the situation. Offer alternatives and incentives to do more business with you. Explain to them you'll do your best to provider for their needs and would like to do a greater volume of business with them. Offer to provide the extras given to profitable customers at a reasonable rate.
Treat these unprofitable customers well, and let them know what they have to do to be treated better. Always be respectful for the business they bring and help them bring more. However, don't treat them as well as your most profitable customers.
/ cultivate-topten | profitable-customers /
By Justin Hitt at July 29, 2003 1:04 AM Subscribe in a reader
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» Retaining Your Profitable Customers from Ask Justin Hitt Blog
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Tracked on February 9, 2010 9:39 AM