- recognise and benefit from “good” customers
A high number of customers is an important prerequisite for success for almost every company. But a customer who makes high sales is not automatically a “good” customer. These are characterised by numerous other criteria, e.g. in that they
- generate high contribution margins (CM)
- meeting granted payment targets and deadlines,
- only complain in justified cases,
- giving constructive feedback or
- passing on positive experiences in the form of word of mouth.
1.1 higher profits and liquidity
Every purchase from a customer increases turnover and, in the best case, profits and liquidity. The more “good” customers a company has, the easier and faster these goals can be achieved. Conversely, the more “average” or “bad” customers an entrepreneur has, the longer it takes to achieve results because profit margins are strained. In extreme cases, losses are even made.
Example: An entrepreneur has a customer who regularly makes high sales. However, the customer always pays only after the second reminder. In addition, he complains about even the smallest errors and irregularities with every purchase. The entrepreneur has estimated that the costs for reminders and interest amount to about 5% of the order value on average. Through complaints and rework, he loses about the same value again. In addition, he has to spend a relatively large amount of time to deal with the additional work caused by the customer. This time is not available, for example, to acquire new customers or to retain “good” customers. The bottom line is that despite high turnover, the customer is at best a “mediocre” customer.
Practical tip: The value of a customer should not be measured by just one factor. Therefore, consider several, individual factors that help you determine what constitutes a “good” customer. Monetary factors, such as turnover or contribution margin, certainly dominate. But qualitative factors can also help to identify “good” customers. Usually up to five factors are sufficient.
1.2 hardly any unnecessary support effort.
So what is the use of high turnover or contribution margins if a customer regularly causes problems after the purchase – as in the example above? A “good” customer is characterised by the fact that he keeps to payment deadlines and only complains when it is justified, he talks openly with the company and points out errors and possible grievances. At the same time, he reacts calmly to mistakes as long as they are not repeated. This gives the company the chance to implement improvements and to serve its customers even better. In this way, there is little unnecessary support effort and the company can concentrate on the production and sale of its products.
Example: A wholesaler regularly buys large quantities of fittings from a shower set manufacturer. The wholesaler notices that about every fourth delivery has grinding marks and scratches. When asked about this defect, the manufacturer discovers that an automatic production machine no longer reliably complies with prescribed defect tolerances due to obsolescence. The manufacturer decides to invest in a new machine and grants the wholesaler a one-time special discount of 10 % in addition to new deliveries.
1.3 transparency about customer structure and Derivation of measures
If you classify your customers by means of factors, you get a good overview of your customer structure. Not only do they know the proportion of “good”, “average” and “bad” customers, but they can also implement targeted measures to improve the customer structure.
Possible measures for the care of “good” customers can be, among others:
- Personal and intensive support,
- regular discussions to find out more about wishes and requirements,
- Preparation of individually tailored offers,
- Offering products with high DB,
- Offering special services, e.g. pick-up and delivery service (Attention: special services must be calculated and included in the price).
These measures may be appropriate for “bad” customers:
- no active approach,
- for orders: Demand surcharges for small quantities, minimum purchase quantities or similar,
- only address customers with classic advertising,
- insist on cash payment, advance payment or direct debit.
With “average” customers, it must be examined on a case-by-case basis whether it is worthwhile to develop them further.
Practical tip: Above all, speak regularly with “good” customers to find out as much as possible about wishes and requirements, but also contact possibilities. These customers should be motivated by small gifts to actively spread the word of mouth.
1.4 ten characteristics by which you can recognise good customers
A good customer must bring more than “just” sales. The following list shows what else is important and how you can benefit from it. If it is pinned up on a pinboard in the office, you will have the “good” customers constantly in view!
Practical tip: From the following list, at least six factors should be selected that are particularly important for one’s own business for customer evaluation. Each customer can then be classified in a simple way with the help of the factors: Good (average/bad) customers are customers for whom five to six (four/less than four) factors are positively assessed.
- Regular purchases: One achieves permanent revenues and profits or contribution margins – the most important prerequisite for success.
- Few small orders: The larger the order, the greater the potential contribution margin or profit per order/product. Rule of thumb: Add the average processing time for preparing the offer to the variable costs. The difference between net price, variable costs and processing costs is then the “real” contribution margin.
- Timely payments: The liquidity situation is good or improving; the costs as well as the workload for reminders are low.
- Justified complaints are openly voiced: One is made aware of possible mistakes in the business and gets the chance to learn more about the customers’ wishes.
- Adherence to deadlines: Punctual customers help to be punctual themselves and to keep their own deadlines vis-à-vis other customers.
- Understanding/tolerance for mistakes made: Chance to keep a customer despite mistakes made. Prerequisite: Fair-minded behaviour and no “repeat offences”.
- Flexibility and openness to suggestions: Improved sales opportunities because the customer accepts good suggestions for change.
- Openness to consultations: Through sound sales discussions and answering follow-up questions, the offer to customers can be constantly improved.
- Recognition for services rendered: Motivation and incentive to continue to perform very well in the future.
- Networks/contacts: Assuming good work and performance, there is the possibility that satisfied customers will recommend the company and one will receive new orders.
A detailed and precise evaluation is often not necessary, as it is a matter of a basic assessment of the customers and an allocation to a category. However, if possible, two to three employees, also from sales, should be involved in the evaluation and assessment, sales staff should be involved in the evaluation and assessment in order to arrive at a realistic classification. If this describes the customer as “bad”, measures should first be considered to improve this relationship before more drastic steps are taken.
All information and details in our articles and information have been compiled to the best of our knowledge. However, they are provided without liability. This information cannot replace individual advice in specific cases.
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