There was much discussion and analysis back then about firing the least profitable customers. There was a consensus that customers who generate higher margins and profits should be fired. One executive said to me that he’s been doing this for many years. I gave up working in practice long ago.
In today’s economy, every dollar and every customer is precious. How can you evaluate your customer relationships and decide if your high-maintenance customers will be worth keeping? These five steps will help.
1. Your best customers.
It is crucial that you understand how to make the best use of your time. Ask yourself: “Who are my most loyal customers?” These three simple questions will help you find the answer.
– Is this customer financially viable?
– Does this customer have strategic importance?
Is this customer a repeat buyer with high volumes?
If you answered yes to any of the above questions, it is likely that you should nurture these relationships. Take a look at the answers to all three questions. If the answer to the profitability questions is “yes,” take a hard look.
2. Don’t forget your qualitative thinking cap.
Let’s do a little analysis. You can learn a lot from your best customers. Here are some examples:
They can take you in new directions that are consistent with your business model (product/service extension).
They will challenge you to be better.
– They will ask you to do the things you are good at.
They will pay a fair price for you and appreciate the value that you add.
You would be a much better sales organization if your customers answered these questions.
What is most important to you? How do we help?
What do you want to be in a few years? What can we do to help you?
– What attracted you to do business here?
– What would happen if you did more business with us?
The answers to these questions can bring you a deeper set of benefits if you look at yourself. These questions will help you attract customers who are like your best customers.
3. Do the math.
Once you’ve learned some facts about your top customers, it is time to start working on your least favorite customers. Why are they so high-maintenance customers?
They don’t pay enough to cover their bills.
– They pay slowly.
They abuse your people.
– They use your business to ask for things that aren’t in your agreement.
Next, take a pencil to paper and do some math. How much do you have to pay for this customer’s service-rework, unwarranted credit, and primary service? What about the intangibles-abusive language, general aggravation? Is it logical to attempt to fix things first? Is it possible to make it work without the customer? What would be the consequence?
It is essential to do some self-analysis. Good relationships with customers are built piece-by-piece, call-by-call, and experience-by-experience. They are made on the customer’s value at all points of contact. Before you take any action, ensure that you aren’t the problem.
4. Fire, aim and prepare.
Face-to-face meetings are a great way to discuss your solution’s relevance to the customer’s success and needs. You can offer alternatives to save the relationship. Are they willing to buy more, do different things, or pay differently? Are there fees for late or rework? Ask them to leave if they won’t work with you. You can give them the names of other suppliers.
5. It takes time to fill in.
Too many salespeople chase too many targets and use too little time. Long-term results will be realized when you fill customer gaps with the correct customer targets.
– Who are you looking for in customers? What segment is the most profitable? Which has the highest potential for growth?
– Are you able to accommodate customers outside your sweet spot?
Review customer losses to assess your selling processes/operations.
You need to foster these relationships if the answer is yes to any of the questions. Take a look at the answers to the first two questions. If the answer to the profitability questions is yes, then take a hard look.
Your customers will value you and your business. These relationships require a deliberate commitment of time, proactive strategies, and a conscious effort to build. You must make sure that you invest in the right people to achieve profitable results.
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