How well do you know your customers? Which
ones are the most profitable? Which ones take most of your time? It's worth
taking the time to find out. If your business is like most, the 80-20 rule
applies. That is, 80% of your profits come from 20% of your customers.
If you can identify that top 20%, you can
work hard to make sure this group remains satisfied customers. Sometimes all it
takes is an appreciative phone call or a little special attention. Also, by
understanding what makes this group profitable, you can work to bring other
customers into that category.
Keep in mind that it's not always profits
alone that make a good customer. Other factors, such as frequency of orders,
reliability of the business, speed of payment, and joy to deal with are
important too. Ask your accounting staff and your sales staff. You'll soon come
up with a list of top customers.
There's another way in which the 80-20 rule
applies to your business. Very likely, 80% of your problems and complaints come
from 20% or fewer of your customers. If you identify those problem customers,
you can change the way you do business with them to reduce the problems.
Consider changing your pricing for those customers so that at least you're
being paid for the extra time and effort they require. Sometimes the only
solution is to tell these customers that you no longer wish to do business with
them.
The bottom line is that understanding your
customers better can only help your business. Contact us if you need help
analyzing your customer profitability.
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