We have been told for a long time that customers should be treated like a king. I totally agree with this statement, except when the customer treats you and your employees badly. Some customer demand services and discounts that actually make it unprofitable to service them. Yet most business gladly serve these customers mistakenly thinking they are some how adding value to their business.
Everybody has heard the 80/20 rule: that is 80% of your sales and profits come from 20% of your customers. What would happen to your business if you stop servicing the other 80% of the business that only generates 20% of the profit?
As business we have to step back and take a really hard look at who are customers are and how much real value they create for us. The value they create isn't always measured in profit dollars. Some customers may create value by helping to build your resume so you can attract other more profitable clients. Others may add value by buying large volume of products or services that allow you to gain economies of scale for a the rest of your business. It is critical to fully understand the full value that each of your clients brings to your business. Once you have, then you are ready to trim your customer rolls and keep only the valuable customers.
Once you are certain you understand the value of each client, now you need to take a look at the clients that are creating negative value and fire them. How do you fire a customer? One easy way is to assess the cost of servicing that client and then charging them enough to cover your costs and leave you a profit. Another is to prioritize your best clients so they get the service they need.
For more strategies on learning the value of your clients and firing unprofitable clients contact me: dr.harj@gmail.com
