All Customers Are Not Equal - Why CRM Matters
Customers are different. Most of us are happy to accept that. But when it comes to crunch time, and focusing resources, many of us fear it would be politically incorrect to say that some customers are more valuable than others.
Given the varying backgrounds, needs and wants of your customers, as well as their widely varying motivations, the differences are clear from a psychographic point of view. However, it’s equally clear from a financial point of view - even a cursory glance over your sales data reveals wide discrepancies between customers - showing which customers are really valuable to your business. Some only buy when you run promotions, others at specific times of the year, still others only for convenience. And then there are the brand loyalists who buy from you day in and day out, unwaveringly.
Most businesses will see some variant of the Pareto principle in their customers - that is, that 80% of sales are generated by 20% of customers. Given that, it is crucially important that we know the customers we are able to satisfy very well, and we should move to satisfy them even more, whilst driving margins. Equally, it’s important that we know which customers we just break even on, and even lose money serving.
Some businesses choose to fire their less profitable customers. We don’t necessarily espouse that philosophy. But we do suggest that you consider giving profitable customers superior service (at a premium of course!). Airlines transport all their customers from A to B, they all get there at the same time, but some are delighted to pay a premium to travel First Class. Likewise, hotels sell some space at premium rates because it includes additional benefits, like views and additional facilities.
The point is that customers come in different sizes and shapes. Their value to the business also differs. It would therefore be very wrong to treat them equally. Some people will shout "that’s not fair." But it’s equally unfair to treat a £10,000 customer the same way you’ll treat a £10 one. It makes good business sense to spend more resources – time, people and money – serving your best customers.
You may work hard to up-grade your low-value, less profitable customers. But don’t discourage your most valuable customers by treating them like everybody else.
Take-aways:
- 1. Treat your customers differently on the basis of needs and value to the business.
- 2. Segment your customers according to their needs and profit potentials and tailor services to them.
- 3. To improve profit, consider charging premium prices for enhanced services offered valuable customers.
- 4. Consider offering self-service for less profitable customer segments.
- 5. Use humans to serve high-value customers, while using technology to serve less profitable ones – so long as it’s less expensive.
- 6. Analyse customer data at regular intervals to see who is moving up or down your value ladder.
How are you going to go about segmenting your customers and dealing with them individually? A CRM (Customer Relationship Management) system is a great way to do this. If it’s plugged into your Point Of Sale, you’ll get immediate data, and oftentimes data of a higher quality since more information is typically collected there. Some systems, like the Cegid Retail CRM Software will automatically capture that data, categorise it according to your rules, and action it into loyalty or promotions modules, as needs be.