Rating Customers For Greater Profitability!
All the customers are important but knowing which ones are truly profitable, can hugely impact your business decisions. Investing time to classify customers as ABCD, based on parameters like credit history, business potential and ease of doing business will ensure that your top 20% customers who give you 80% business get the time and attention they deserve. Client rating exercise also helps to set realistic marketing goals and take smart decisions for optimal outputs.
So here is how you can categorize your clients.
The ABCD Rating.
Who are your ‘A’s? Type ‘A’ clients are the “Awesome” ones, because they are great to work with and provide repeat business. These clients refer you to others and help you grow your business. “A” customers are also loyal and pay on time. They trust you and are with you because of your service, quality and name in the market. It’s not about price with A listers. List out your ‘A’s!
Know your “B”s. Majority of clients fall into the Type “B” or “Basic” category as they give you average volumes and standard profit margins. They are more price sensitive and are often ready to compromise for a price off benefit. Bs are your bread and butter and have potential to move to “A”. How well do you know your Bs?
C is “Can’t Deal With” or “Coupon” customers as they are more interested in discounts. They also complain more and are demanding. They squeeze you heavily on margins and often delay payments. Although C type do not add much to bottom line, they do matter if you consider the effort required to handle these clients. Analyze and Prepare to take some bold steps.
D are the “Dead” customers and they are not buying from you anymore or are one time customers with no further potential to buy. These can also be clients who want free services and are unwilling to adapt to changing times or new things. You don’t need to think about them.
Using The Rating Right.
- A Type – Focus on them continuously, appreciate them, offer them luxury services and work towards nurturing a profitable relationship with them. Idea is to make As your raving fans and advocates. Invest in loyalty programs and contact programs using social media, newsletters or even telephone calls to keep in touch with them. Reward & Recognize them and create Raving Fans. Invest your marketing budgets for targeting the same profile.
- B customers have potential to convert to ‘A’ over time so that they become your advocates too. However this requires being alert to opportunities to build on the relationship. B category will behave like the A group if they perceive they are given A type treatment. Build Relationships and WoW them.
- C is a difficult category as converting these customers to “A” or “B” type is tough. You can choose not to service them any more by increasing prices or demanding better payment terms. Deal on your terms or lose them to competition.
- D types are last on the list and frankly not your customers any more. It’s better to redirect you energies to more potential clients in group A or B. Do nothing.
Rating exercise will be an eye opener and may show you that you have smaller number of A & B category clients than you expected. However it will also help you identify opportunities to diversify, up-sell or cross-sell with the top clients and direct efforts to clients where you need to cultivate realathionships because of business potential. Rating helps you realize the financial sense in allocating time and efforts to clients who give you maximum business. When you know your customers well you are equipped to consistently reinforce those clients who give you the best returns and long term stability.
If you can do more business with clients you love and who love you back then you are well on way to growing an “Awesome” company.
The tips we share are a small part of what we do at our coaching sessions.
If you’d like to take the whole framework and install in your business, then do drop an email at [email protected] with subject line as “Scale Session” and we’ll reach out to you with all the details quickly.