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How to Find Your Best Customers
As a business owner, you value each of your clients. After all, they enable you to create jobs and pay your bills. However, when it comes to actual business value, the fact of the matter is that roughly 80% of your sales likely come from only 20% of your customers.
How can you learn more about the most profitable 20%? What characteristics do they share? How can you find more customers like them? A little bit of research can lead to a more efficient and profitable business.
Look at the Numbers
Without diving into the data, you may assume that the customers that produce the highest revenue make up your 20%.
In some cases this may be true, but it can be extremely misleading. Some customers may purchase large quantities of low-margin products or services. Others may require a lot more support or “hand holding” (and therefore labor) than others. Even though the revenue may be high, profit margins might not be.
Recency, frequency, and monetary value (RFM) analysis can help you determine your most profitable customers. By looking at the RFM value of purchases, you can get a clearer picture of who your best customers really are.
The Intangibles
Sometimes the hard numbers just don’t tell the full story. This is especially true with small businesses.
If you have clients that are friendly, loyal, easy to work with, and see the value in the products or services you provide, this can make them extremely valuable to you.
These types of customers don’t take a lot of time to support and won’t call you with fire drills every time something doesn’t go perfectly. Customers like these are also the ones that will evangelize your brand by word of mouth or on social media. While their value is less quantifiable, they are important to your business.
Show Your Best Customers That You Appreciate Them
Once you know who your best customers are, work on keeping them happy.
Handle any account issues promptly and thoroughly. Reach out to them personally to get feedback and keep lines of communication open. Send nice holiday gifts to let them know that you care.
Show your customers that you appreciate and value their business.
Seek Out More “Best” Customers
Use the information you’ve learned about your most profitable customers to look for patterns.
Create personas for your ideal customers. What products or services will they purchase from you? What industry are they in? Where are they located? How much time will they take to support?
Once you understand the best types of customers for your business, focus your marketing budget on attracting more of these types of customers.
Begin Weeding Out “Bad” Customers
It can be difficult to turn down business, but some clients are just better for the health of your business than others. If your company is in a position to do so, only accept new business that falls within the profiles you’ve created for profitable customers.
With your new ideal customer in mind, the final step is to start letting go of some of the customers that are not profitable. For some it may be as simple as not renewing a contract. For others, you may need to cut ties in order to free up resources to serve better customers.