The term “profitable customer” can sometimes be quite subjective. To simplify this I have outlined the top six elements that will enable you to decide who the profitable customer is.
- When customers purchase high-margin products and services
- When they pay full price, don’t bargain for discounts, and do not ask you to amend the terms and conditions of the contract
- When they purchase through few large orders rather than many small orders
- When they do not cancel or amend orders
- When they pay in advance or pay on time without you chasing them for payment
- When they are happy with standard after sales service
To know the profitability of each customer you will have to scrutinise and analyse your CRM and sales data. I’ll bet that if you haven’t looked at this before, you’ll probably be in for a big surprise! In most businesses the 80/20 rule applies and you can determine just “who” that 20% really is.
Segmentation will allow you to communicate in a targeted manner, and this should be based on profitability.
Being proactive on these issues will help you focus on your most precious customers, and this will be your lead over the competition. As said before, some customers are more valuable than others; this is absolutely common and can be for a variety of reasons, such as time of purchase, quantity of purchase, frequency of purchase, etc. The trick is to identify these customers, focus your sales efforts towards these customers, and start running a campaign to attract new customers with a similar profile. All you require is the right information at the right time.
Chintan is the Founder and Editor of Loyalty & Customers.
