Does your company view all customers the same? Most businesses do. However, not all customers are the same and they can be categorised into at least four classifications. The simple classifications can be made by considering two factors – how much profit you generate from the customer, and how much maintenance does the customer consume. “Maintenance” can be defined as the amount of effort, resource and energy that you need to invest into the customer relationship to keep them happy. The four classifications are:
Grade A Customers – generate high profits and require low maintenance.
Grade B Customers – generate medium profits but require high maintenance.
Grade C Customers – generate low profits but require low maintenance.
Grade D Customers – generate very low or no profit and demand a high level of maintenance.
Clearly all business managers would love to have all grade A customers creating maximum profits for the lowest levels of maintenance. However, most businesses do not spend enough time with their grade A customers, and they do not actively try to find more customers of this type.
Grade B and C customers are fine but again it should be possible to do more business with them by spending more time, and by focusing targeted promotions upon them.
Finally we have the dreaded grade D customers which can consume over 80% of your time, energy and resources. Can anything be done to turn these loss making accounts into more profitable ones? Is the level of maintenance justified for the customer’s spend? Should some of the maintenance, service and support be charged for? Or should the business consider increasing its prices?
The most important thing is to know where all of your customers are categorised and where you are making money. It is a relatively straight forward and easy process to determine which customers are generating a profit and which ones are not. Campbell Ventures regularly reviews and assesses the profitability of our clients’ customers, product ranges and business divisions. With this information informed decisions to drive the business forward profitably can be made.
For further information about this article or for a confidential, no obligation discussion on how this could impact your business please contact Mike Campbell, Managing Director on +44 7771 615641 or mike@campbell.pwebs.co.uk. Or further information regarding Campbell Ventures please refer to campbell.pwebs.co.uk and www.china-business-experts.com.