In business our customers are our lifeblood and we are told that we should do everything to keep them satisfied, and that the customer is always right.
Well, in reality some customers are more right than others, more right for us that is.
Take a look at the table below which should be used to access just how right our customers are. We should plot them on the graph comparing revenue generated and the effort needed to manage the customers.
Low Maintenance/High Revenue customers are the ideal customers and these customers are always right.
However any customers that fall into the high maintenance category need to be investigated because depending on the amount of effort needed to manage them, these could well be wrong customers.
High Maintenance/Low Revenue customers are probably not even paying their way and we should definitely look to see whether we should consider serving them. It’s true that the squeaky wheel gets the oil, but we should look to check to see whether that wheel is deserving of the oil or needs to be replaced.
At one company where I worked our customers fell into two categories, the 20% who generate 80% of the revenue, and the 80% which generated just 20% of the revenue. What’s more interesting is that the 80% group also generated over 70% of the costs.
One way to increase profitability would be to release those customers who were costing too much.
We need to take a FAST Approach we make sure that we are Focused on the right customers, the most most profitable customers, and we can use this simple tool to create the transparency necessary.
We don’t always need to drop customers in the high maintenance group, but we should at least look to develop strategies to reduce the efforts to manage them. These are probably the customers who cause much stress for the teams, so anything we can do to reduce the effort can have a benefit on staff morale.
Take the opportunity to use this tool and see which customers you need to be focusing on and which ones you need a strategy for to move them to low maintenance or out of your business.
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