Many establishments don’t know who their most profitable customers are, let alone how to keep them coming back to their #business. In difficult times, customer loyalty may be your greatest weapon. Many businesses struggle to define which of their customers are actually their most profitable. Profitability isn’t about measuring their level of spend within the business; if, for example, a customer has unrealistic expectations of your service, they can become a drain on your customer service resources. This can result in a negative impact on the service you are able to deliver to your other customers. This is why it is crucial to profile your customers and understand which ones are profitable and which ones may actually be costing you money. In the first instance explore resetting the expectations of these demanding customers or consider a different charging structure, which means that you can afford to provide a higher level of service for them, hence retaining them but converting them into profitable customers.

Working with certain clients is a pure joy. You get along with them personally, they are easy to work with and they seem to make you look better than you are. These clients are usually more profitable to you. Other clients are a complete nightmare. They may be mean, unreasonable or irrational. They prevent you from delivering great results and get in your way, even if they don’t intend to. It’s impossible to do a great job for them. However the only way to find more of the former is to get very clear on two things: who you are and who they are.

1. Define who you are and identify your unique strengths

Everyone has a specific set of values and worldview. It is important to accept this as truth, as part of who you are, and realise that you will naturally attract some people and repel others. You will get the best results for those with whom you share the same value system. You also need to be honest about how you can best help clients. You aren’t good at everything and it helps everyone when you accept projects where you can excel and discard those where you cannot. This requires you to suppress your ego and turn away businesses when it doesn’t fit.

2. Define who you serve and be willing to stick with

What does your ideal client look like? You can pick a set of criteria based on revenue, employees, industry, end markets, company structure or phase of growth, but you have to choose. Assuming everyone is a potential client means you will never really become an expert in a given area. Some professionals, whether out of fear or greed, don’t want to decide on these two things because they feel it limits their opportunity. I don’t see it this way. As a business owner/#entrepreneur, you should rather be the provider of choice for a smaller universe of clients and prospects. You should rather spend more time with fewer clients and know that I can you can deliver great results. It is not limiting, it just means you have more market share within a specified universe of clients. It is with those clients, you can perform better, be more profitable and get more enjoyment out of the work you do.

It is important to focus a business’ service efforts on the clients who add the most long-term value to the business. To identify them, you need to evaluate their value in the following seven key areas:

1. #Sales minus cost: Most companies rank clients’ importance by the amount of sales they do with their establishment. Unfortunately, this leaves out a key component of the equation. While a client can do a lot of business with a company, the cost of doing those sales has to be added to the overall equation. Many clients provide a lot of revenue, but the cost to fulfill those sales sometimes exceeds their value.

2. Revenue timing: Not all revenue is created equal. If the business sell consumer electronics, it probably already makes a lot of revenue in the fourth quarter when everybody is shopping for the holidays, but could use more in the first quarter. Sales that come in off-peak seasons may be profitable because they fill unused production capacity or may be done at a slightly higher price.

3. Referrals and buzz: In the age of the Internet, clients believe more in earned media like peer reviews, posts and tweets than in corporate advertising. If a client is willing to be an evangelist of a company and spread their satisfaction story, it can be a powerful endorsement. Unlocking the potential of the successful fans in any business can be incredibly profitable.

4. Retention: It is, of course, less costly to retain the clients a company has than to seek new ones. Unfortunately many businesses are so busy attracting new clients to come to their front door, they don’t take care of the clients leaving the back door. A client who has been with a company over a long time is generally more profitable, typically buys additional products and becomes an evangelist for the brand.

5. Add-on products or services: Clients who can buy more than one product from a company are more profitable because the cost of acquiring that client is now spread over a larger sales base. For example, Amazon is able to expand into other business lines since clients know the efficiency of their customer service. Many clients shop for products elsewhere and then buy on Amazon.

6. The client’s brand: This is especially valuable to small establishments. If they do business with a well known brand, they can build their reputation based on it. For example if a first-class celebrity buys a company’s product and talks about it, demand for the product skyrockets.

7. Feedback: Although social media makes it easier, most clients never tell a company what they think about its products. Typically only the top 10 percent (satisfied) and the bottom 10 percent (very dissatisfied) share their thoughts about a company’s service. Any client willing to share his or her opinion with a business is very valuable.

Tags:  business Compete Sales Customer Relations entrepreneur Latest Manage Customers Sales