“How can a company retain its profitable customers” — Jasper
You are asking yourself a very important question for the growth of your sales, for the strength of your business. Retaining more of your profitable customers is more powerful than keeping just any customer. Here’s how to get started:
To retain more of your most profitable cutomers you first need to know who is profitable. It starts with cultivating your “top ten percent customers”, you’ll find details on the process in “How You Can Cultivate Your ‘Top Ten Percent’ Customers for Greater Profits” but it’s important to understand why.
Often less then 20 percent of your customers account for 100 percent of your profits, look at a profit and loss by customer for proof. The rest of your customers bring you down to your profits to their current levels. Unprofitable customers literally drag your company down to substandard results.
Step 1, Fire your unprofitable customers. This could be as easy is firing anyone that annoys you, is difficult to work with, or costs too much to deal with. Be careful here, fire the wrong ones and you’ll lose valuable cash flow. Use a proven method that considers customer lifetime value.
Step 2, Develop a profitable customers profile. Determine what needs to be in your lead qualification process to know in advance a new customers will be worth having. This includes knowing how much you can spend to get a customer, and what each customer looks like.
Step 3, Go where your buyers are. Look at each marketing channel, determine which produce the best customer. It’s a multiple channel approach designed to find the inputs to your output of profitable customers. Often improved targeting highlights new opportunities to keep the profitable customers you have.
Step 4, Develop a clear plan. Most often sales people just don’t know who they should be prospecting. Marketing isn’t clear on a qualified lead, and management pushes in the direction of gross rather than net returns. The right plan will include implementation, lead qualification, retention marketing, and a referral plan.
The reason your question is so powerful is because it’s cheaper to keep the profitable customers you have than to get new ones — but you’ll get faster results cutting unprofitable customers. In other materials I explain some risks in just cutting, often increasing their prices is a better approach.
Either way, your customer retention plan needs to include more regular (and relevant) communications with profitable customers, a survey program to understand deep buying desires, and return customer lead generation actions. Customer service (even experience) alone won’t keep profitable customers returning, a certain percentage of your sales and marketing efforts needs to invite them back.
Just remember, you can have the perfect plan but targeted on the wrong customer, you’ll be no better off than you are today. However, find the right combination of profitable customers and you’ll stabilize your business to grow in any economy. That’s what I want for you, contact my offices if you have any questions.
© 2010 Ask Justin Hitt, All rights reserved.
Justin Hitt turns on the profit spigot for business-to-business technical services firms who want to grow in any economy. For a one-on-one initial consultation, be sure to visit http://JustinHitt.com/
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