They bring me in lots of other business
Loyal customers are a great feeling. They can have low maintenance costs. Or they might be sucking your profit out of you. Are they at the end of their life with you? Are you spending lots of money to keep them with you? Where’s the profit? Maybe it’s time to let go.
Revenue gives many people a lot of comfort. It certainly did to those dot.com businesses who were getting lots of revenue by effectively selling dollar bills for 75 cents. Revenue is no indicator of profitability. In some cases it indicates the exact opposite. Big customers expect bigger discounts, take longer to pay and basically think they have the whip-hand. If they do a lot of transactions with you, then they are no different to a group of small customers: the costs are still there but you aren’t getting the same level of revenue.
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Every customer was small once. The skill is in picking those who will become big and nurturing them. Some will always fall away, but a regular review of your customers will provide an accurate, up-to-date view.
These days, there are a range of options: contact via different channels such as web self-service, priority phone numbers; use of accounts and statements; placing bundles of stock on customers premises for them to use as required; differential pricing to reflect the cost of supply. There is always a way to maximise customer value while minimising use of your resources. It’s just different for different customers.
Finding customers isn’t easy so don’t let go of those you want to keep. There are a range of options to turn your customers into advocates and to break into new markets: understanding and matching their needs more closely is a start.
Dumping a customer brings many consequences. Bad publicity (a dissatisfied customer tells 40 people), impact on related accounts and just the hassle are a few. Better to change the customer to one who makes a greater contribution to your bottom line or one who moves away voluntarily if you have to.
They’ve been with me for a long time
They spend a lot with me each year
How can I get rid of my loss-making customers?
A common problem. Think of ways to reduce the costs of small orders: can you consolidate them into larger ones, price appropriately or consider a reseller?
We always get lots of small orders
If they really do, then that might be fantastic. But do you know which customers they are bringing in? Do you know if you making more on these referred customers than you are spending on the one doing the referring? But don’t just think about the direct financial aspect. Many companies have ejected personal customers to discover that in another guise they were directors of major companies and they took all that business elsewhere as well.