Nine Things Unprofitable Customers Aren't Going To Do For Your Business

By Justin Hitt, Strategic Relations Consultant,

The shocking truth: Not all customers are profitable. Many of your customers, up to 37% according to an internal survey, are ripping you off, stealing your hard-earned revenue, and actually hurting your ability to create value.

To remove these damaging customers first understand who profitable customers are. Understand this one point, and unlock your ability to attract profitable customers quickly. Profitable customers are:

  1. More profitable than the average customer -- By basic calculation, profitable customers create more revenue than they cost you to serve. Orient your marketing to talk with above average customers.
  2. Identifiable by 10 to 20 specific traits/characteristics -- Use hindsight to describe those best of the best customers you've served over the last three years. What about these customers helps you identify others just like them that you aren't already serving?
  3. Producing a greater return on marketing efforts -- For every dollar of marketing or sales effort, profitable customers represent those who have the lowest cost per sale and highest revenue per sale. Are you tracking customer value by source marketing campaign?
  4. Measurable and identifiable by association -- Profitable customers are easy to find and usually hang out with others who could become profitable customers too. Are your best customer's members of certain trade groups, do they read certain publications?
  5. Low maintenance -- No complaining, fewer returns, less headaches, projects finish on time, and after the sale most follow up is to up sell. You'll have an overall lower overhead with profitable customers.
  6. Paying their bills on time -- What does an uncollected dollar really cost you? When you lose fewer dollars to collection efforts, more revenue moves into your business to generate growth. Identify those customers who always pay on time.
  7. Leaders in your referral base -- If your referral program isn't tracking the source of new leads, then you may miss a powerful indicator of profitable customers. Profitable customers want others to experience the value you provide them and will speak favorability of your firm.
  8. Repeat buyers of profitable solutions -- The profitable customer purchases again, and again, even moving up your product lines to premium solutions. Do you give existing customers the opportunity to buy something else after the initial sale?
  9. Willing and excited buyers -- You'll find profitable customers are really benefiting from what you offer, so much so, they are passionate about the purchase decision. Did you know others who haven't yet purchased from you have the same emotions you can tap into for a sale?

There is one report you'll want to call accounting for immediately, what you'll find will shock you. This report is a modified Profit & Loss Statement By Customer that shows direct costs plus an overhead rate minus total customer revenues. This report is by far the easiest to extract from any accounting system, yet ignored by most executives. (To save time, ask accounting to provide the top and bottom 10 by profit. )

Business to business firms who create profitable customers quickly also use a scoring system that identifies target buyers. Make these scores available to users of your customer relationship management (CRM) system as a market segmentation tool or selling guide.

Methods to identify profitable customers don't stop here, there are at least 32 other ways, depending on the type of organization and structure of your solutions. Many of these ways don't even require you to be good with numbers (you don't have to be an accountant to be profitable. ) What do you already know about your profitable customers?

The most important thing to take away from this message is to talk about customer profitability, talk with sales, marketing, and even accounting. When everyone is clear about what makes profitable customers you are more likely to find those diamond buyers in your industry.

© 2005 JWH Consolidated LLC dba Center for Strategic Relations, All rights reserved.
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Justin Hitt helps executives create and keep more customers in a cost effective way. Drawing on more than a decade of experience in customer relationship management and customer profitability. Contact him at

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