Subject: Keeping High-Profit Customers Author: Dennis S. Vogel
I originally wrote this based on bricks-and-mortar businesses & direct sales. It can be adapted for other sales methods.
There are limits to the profitability of any transactions. Even for mail order & web sites, processing & fulfilling orders can be costly despite automation.
Some people figure businesses should welcome any transaction.
Big Box Stores Are Different
Since big discount stores give very little service, their fulfillment costs are low. They can afford to get small amounts of money per customer, as long as each store gets a certain dollar amount everyday.
Retailers offer varying levels of service to help customers choose & use products. Ancillary services increase costs of selling products. Some stores would have a hard time competing against discount chains without ancillary services.
Because of ancillary services & other cost structure factors, some retailers can't afford to have a lot of small transactions. Higher product prices can cover service costs only if people buy enough products.
Small transactions may take up as much time & energy as big transactions.
Thrive, Don't Just Survive
For start-ups, it may be necessary to serve whomever is able to buy. After the business is established, your marketing should focus on customers who can pay for the best quality you can offer.
Low-profit customers might prefer low quality products. Since stores can't stock every possible product, you might choose to stock only high quality products.
People might haggle over prices if they don't want or need high quality.
It may be best to refer them to a business (possibly a competitor) that has a different cost structure, inventory & skill set. People could be profitable for another store, though they might be low-profit customers for you.
Retailers, who stock low quality products, might serve them better & profitability.
Since there's a maximum number of customers you can serve, it's best to attract those you can serve optimally. Businesses shouldn't be set up to serve anybody in general. Businesses should be set up to serve specific niches.
You'll have make a judgment call because some low-profit customers may become high-profit customers.
It can be financially risky to serve low-profit customers. They may demand the same amount of service or more from the staff than high-profit customers.
High-profit customers may buy often & buy a lot per transaction without tying up the sales staff up for long periods of time.
Profitability & keeping profitable customers depend on effective & efficient service.
Here are some considerations for effectively & efficiently serving customers:
How much time do people spend shopping? While they shop, how much attention do they expect from the staff?
How many questions do they tend to ask? Do staff members know the answers or do they search for information?
Is most of the inventory available on the sales floor or is it in stock rooms?
Do people expect some products to be specially ordered?
Do people tend to browse without help?
Do most customers know what they'll buy when they walk in?
Do most customers leave with purchases or without purchasing?
If shoplifting is a big risk, how much do staff members pay attention to each person?
These factors matter because -
1a) Some potentially profitable customers may go to competitors because they're not satisfied by distracted employees.
1b) Customers might not wait in line & leave without buying.
2a) It's bad for staff morale if they're pulled in too many directions at once.
2b) If they serve high-profit customers, they may serve fewer customers & still bring in enough money to cover overhead & generate profits.
3a) Is your payroll used efficiently? If you keep a full staff on duty to handle small transactions, you might pay out more money than you take in.
3b) You should have your staff ready when customers respond to your promotions.
A Higher Profit Solution
You can get more high-profit customers with referrals. They're more apt to know people, like themselves, who may become high-profit customers.
Your main market niche members might shop at specific times. It depends on their social & work schedules. It depends if they buy on their paydays or soon after. They might buy products & services when they need results instead of in advance.
Based on these factors, you should focus on sending offers when customers are ready to buy.
By using database marketing (customer information records), you can call or send letters (e-mail or postal) to high-profit customers.
You should send attractive offers to specific customers instead of sending all offers to the general public or all customers.
Set Up High Quality Customer Services
You'll have a better chance to keep high profit customers when you serve them SPECIFICALLY BETTER than other retailers.
"Specifically better" service means your service efforts fit specifications which customers value.
Clayton M. Christensen, Scott D. Anthony, Gerald Berstell & Denise Nitterhouse wrote "Finding the Right Job for Your Product" in MIT Sloan Management Review Spring 2007 issue. They wrote about how purpose brands help people with their Jobs-To-Be-Done.
Your customer service should be focused on helping people with their Jobs-To-Be-Done. You should focus on helping people find products & services to implement tasks. You should do your best to help people find & use information they need to finish tasks.
Your intentions (to serve customers better than other retailers) aren't enough. You need policies, plans & procedures. Policies specify what you intend to do & why. Plans specify how & when you'll fulfill your policies. Procedures specify actions to implement your plans.
You might have a policy to provide information people need to improve their situations. You can plan how to determine what kind of information people need. You can plan procedures about how to get that information & distribute it.
As you learn more about a specific niche, you can make valuable recommendations for members' situations. As you gain general & specific information about customers' situations, you can make recommendations charts (like diagnostic charts).
You can use a search engine to find sample diagnostic charts.
Problems can be diagnosed based on symptoms & criteria.
Example - A person can look at a display & start using recommendations charts. If s/he doesn't notice a chart, you can point to it & demonstrate how to use it.
Here are sample statements & questions you can have on a chart - "The main reasons for using this product are ___."
"How often does (problem) happen?" "If it happens 3 times or more per week, check symptom list #1." "If it happens 1-2 times per week, check symptom list #2."
"Do you have this problem or these symptoms?" "Do you have (product)?"
If a customer has the product, you can show how to use product for specific results. If a customer doesn't have the product, you can recommend an optimal version of it.
Customer Contact
People might want you to send frequent offers if they appreciate your services. It can depend on the quality of your customer service & what kind of offers would entice them to visit a store.
Since some people move &/or change e-mail addresses often, it's vital to give them ample incentives to keep their information in your database up-to-date. What constitutes ample incentives is up to them to decide.
Ask them or make suggestions like these examples - "We get special offers from suppliers for specific products. What kinds of products would you like to get notices about?"
Since high-profit customers value products/services, it shouldn't be hard to get their input.
Here's a sample script-
"You seem to enjoy what we offer as much as we enjoy serving you. It may be important to you to get notices of offers & new products/services. We can send more details via email than mass media. If we can send you notices by e-mail, we could offer you lower prices because we save money by e-mailing notices. What is your e-mail address?"
"Please be sure to keep us updated on changes of your e-mail address so we can keep you updated?"
-OR-
"Would you like to receive our notices via phone, mail, or through the mass media?"
"Which radio station do you listen to most? When do you listen to it most?"
"Which newspaper do you read most often?"
"Thank you for the information, to show our appreciation, here's __." You can fill in that blank with a brochure or an article of information they can implement.
Practice what you say, so you say it smoothly & confidently. If you're shy about asking, customers may be shy about answering. Ask easily as if it's a regular part of business. It should be a regular business practice.
When they give you information, you can give them an advertising specialty (imprinted with your contact information) &/or valuable information they can implement (with your business information included).
Value includes how & when products/services are delivered & performed. Here are some things to consider about adding value:
When do customers need a result? How do they define just-in-time delivery for a specific result? How can you fulfill it?
Should you work with another business to deliver & install all or part of a result?
How much of a result can you provide? How can you make a result easier to obtain?
How can you make a result more satisfying?
What does satisfaction mean in a specific situation? Does it mean durability? Does it mean more convenience, reliability or functionality?
You can ask customers for more specifics.
Regarding their situations, how do they define convenience, reliability, functionality & durability?
Would reliability depend on customers knowing more about using & maintaining a product?
Do they know how to use product functions in their situations?
Do they know how to avoid more problems?
Combine Concepts For More Benefits
The concepts in this post can be combined with insights about Searchers, Delegators, Collaborators & Streamliners in "The New Market Leaders Who’s Winning & How in the Battle for Customers" By Fred Wiersema.
You can refine your efforts with "The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market." By Michael Treacey & Fred Wiersema. Those disciplines are Customer Intimacy; Operational Excellence & Product Innovation Leadership.
You can set up customer service with guidance in "Branded Customer Service: The New Competitive Edge" by Janelle Barlow & Paul Stewart.
Thank you for using my blog. If you have comments or questions, please post them.
Copyright 2017 Dennis S. Vogel All rights reserved.
Your business will thrive, no matter who your competitors are, if you market it powerfully & do everything else correctly.
