I often come across businesses that struggle to define which of their customers are actually their most profitable.
Profitability isn’t simply about measuring their level of spend. If for example they have unrealistic expectations of your service, they can become a drain on your customer service resources, potentially resulting in a negative impact on the service you’re able to deliver to your other customers.
It is crucial to profile your customers and understand which ones are profitable and which ones may actually be costing you money
This is why it is crucial to profile your customers and understand which ones are profitable and which ones may actually be costing you money.
In the first instance, explore re-setting the expectations of these overly demanding customers or consider a different charging structure. This means you can afford to provide a higher level of service for them, and therefore both retain them and convert them to profitable customers.
Consider carrying out some customer research to understand how their priorities might have changed and what is now influencing their decision-making.
A question of value
Price is becoming more sensitive in the purchasing decision as the amount of customers’ disposable income falls, leading people to reconsider their spend. More than ever, organisations need to ensure they are delivering good value, and good customer service is a critical component in that.
Even with such price sensitivity, higher levels of customer service can potentially persuade customers to pay a slightly higher price. Switching service providers o save a small amount of money might not be considered worth it by many customers.
How well are you servicing your customers?
It is worth asking: are there opportunities to do more for your existing opportunities?
For example, I was recently working with a property alarm company hit by the impact of the recession. The construction industry has been profoundly affected, so the number of properties needing house alarm installations has fallen dramatically.
The alarm company have now reviewed their existing customer base and identified those customers who are due/outstanding a service of their alarm (which is particularly important for some household insurance policies). They have been contacting these customers and reminding them about the need for the alarm to be serviced, and guess what: they are receiving great feedback and experiencing a good take-up rate for the servicing.
A simple phone call to the customer has a positive impact and is a straightforward, low-cost revenue generator for the alarm company – a win-win all round.
If you pay peanuts…
When the financial situation is tough, many organisations look to cut costs, and in doing so, fail to seriously consider any potential detrimental effect on service and a loss of custom. Before implementing any dramatic cost-cutting, evaluate its affect on the end-to-end customer experience.
Many organisations (particularly larger businesses) will have an investment programme to improve their businesses. This might cover improving service, launching new propositions or implementing new IT systems.
The strain on investment spend could see project costs cut. This naturally means that the scope of what’s being delivered by the project is reduced.
Organisations need to ensure that the elements being de-scoped do not adversely affect the customer experience and service that you are committed to deliver. Ignore this and you run the risk of launching a new proposition with statements about exceptional customer service, only to find you cannot keep your promise because you’ve de-scoped a critical part of the project.
Often, when budgets come under strain one of the first areas to be cut is the investment in staff training and development. Remember that the skills, capabilities and talents of your people are critical to successful customer service delivery.
