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Not all customers are good customers

Written by: Sue Barrett

Article Overview: Ever had some customers who spend very little with you but take up enormous amounts of your time? Nothing's ever right, they quibble about every cent and they do not intend to spend much with you anyway. Or those customers who are really nice and you get along with them very well, but you know they do not have the potential to develop into long-term revenue generating accounts for your business.

Not all customers are good customers

Ever had some customers who spend very little with you but take up enormous amounts of your time? Nothing's ever right, they quibble about every cent and they do not intend to spend much with you anyway.

Or those customers who are really nice and you get along with them very well, but you know they do not have the potential to develop into long-term revenue generating accounts for your business.

What do you do? You need sales, but at what cost to your business? These types of customers, in effect, keep you from working with customers where you can get a better return on investment.

Segmenting your customers and your market and then working out the most cost-effective way to sell and service these customers is a very good idea. We have all heard of "ABC" accounts. As being the best, Bs the next, and so forth.

One way I have found useful when segmenting my customer base is to identify the POTENTIAL they have to do a range of business with me over a period of time and then look at the VALUE in terms of revenue and profit they can bring.

Q. What defines a high potential, high value customer for your business?

A. Someone who is doing a lot of work with you and has the criteria to do more work with you in the future. These are your premium accounts and should be looked after with great care.

Q. Who should you go after next?

A. The customers or potential customers who display the characteristics of high potential, but low or no value to your business. Someone who is doing a little or no work with you and but satisfies the criteria to do more work with you now or in the future.

So what does it cost you to get a sale? And are you prospecting in the right area to give you and your business the best return?

Surprisingly some sales people do not know the answer to these questions. In particular, when people start out in business, many do not think about their markets nor about prioritising their sales efforts. If this happens they can find themselves making sales but at a cost to their business.

Depending on the industry, it costs an in-field sales person and their company anywhere from $500 to $1000 per client sales meeting. Given this cost you would want to be very discerning about; (a) how long it took you to get a customer on board and (b) about the value and potential of the customer could give your business.

If you look at your market you can see that you do not want every sales opportunity. However, don't mistake getting a small sale with a high potential low value customer as being a waste of time - these type of sales can be the "thin end of the wedge" to much larger sales, and if nurtured can lead to more sales down the track.

What I am guarding against is trying to sell to those customers who do not and never will meet your criteria for high potential and high value. In sales it is just as important to know when to say no and walk away. It's about how you use your time and effort.

Most people in SMEs are time poor and chasing after sales phantoms is time consuming and potentially exhausting. If you think a potential client sales meeting is going nowhere and will lead to nothing for you, then exit - but gracefully. Don't ditch them, instead be pleasant and state that you are not in a position to help them and that someone else may be better suited to give them what they need.

Make sure you have other referrals or sources handy that you can give them. A good idea is to tee up those referrals before hand and know where you sit relative to each other in the market. This way you will leave on a good note. And you never know where those customers may turn up in the future. They could turn up somewhere else and be the right kind of client for you then.

Alternatively, if you come across customers in who are low value and low potential in relation to your current sales structure and effort - that is, it's too expensive to sell to them - then a telephone sales person maybe the right level of sales effort required. A telephone salesperson costs a business less and can be used to make smaller and more frequent sales. Then again if that is too expensive you may be able to use online ordering to sell and service them.

Defining and understanding your target market is integral to sales planning as it allows you to determine where you will get the best return on investment from your sales efforts.

So scan for the right criteria of what viable prospect/customer looks like for you. If not properly evaluated, many sales meetings can become very expensive cups of coffee.

Remember everybody lives by selling something

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  Having Conversations with Prospects
  Sales Killers to Avoid
  Enhance Your Value
  They all buy. Only some return time and again

Article Tags: abc, customer base, period of time, return on investment, sales efforts, term revenue, value customer



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