Have you ever heard or repeated the old saying “The customer is always right”? Let’s take a look at that old maxim in the context of the real world of business. We would like to offer this as a counter statement: “The right customer is always right, but the wrong customer is often very wrong—at least for your business.”
Businesspeople who have begun with “the customer is always right” philosophy will often discover the necessity of categorizing customers, whether they want to or not. This is especially true for companies that depend heavily on repeat business. After a few years, it becomes painfully obvious that some of your customers are much more valuable to your business than are others. Some are actually a detriment. Be honest about that.
Our suggestion, then, is that an entrepreneur should start out while the business is still in its formative stages, trying to find out who that ideal customer is, and which ones to avoid. This is what we choose to call the central demographic model—that ideal customer whom you can serve effectively given the nature, size, and scope of the business you have to offer.
The other day we found a newspaper ad that featured the phrase No Job Too Big or Too Small. Think about that phrase for a moment. Doesn’t this sound like someone who is so desperate for business that he or she will twist and reshape services in any way, just to get the customer’s money? How much better would it be to say, “This is the scope and complexity of what we have to offer, and we can do it with excellence. Let’s see if it will work for you.” The too-small job won’t be worth your effort, and the too-large job can ruin your business reputation when you lack the infrastructure to do it well.
But the issue goes beyond scope and complexity. What if you find that one of your customers simply doesn’t share your core values? One example that should be obvious would be integrity. If your business features honesty and fairness as core values, you will have a great potential for trouble if your client doesn’t share those values. In short, a customer who doesn’t share your core values is not likely to be your customer for long-that is, as long as you don’t believe that the customer is always right.
In the SecurityPros statement of “non-negotiable values that guide us,” these are the core values: professionalism, honesty, reliability, service, and fun. At the end of that list is this sentence: “We will form close, long-term relationships with clients, employees, and suppliers who share these values.” If your business doesn’t have a list like this, writing one would be a good idea.
Your customers can usually be categorized into three separate groups: the top (those with great compatibility and appreciation for your core values and operating philosophy), the middle (those who can be developed into the top with some time and effort), and the bottom (those who are causing the most stress and who give you the smallest overall payback on your company’s time and effort). Let’s call these the A, B, and C customer, respectively.
Your best procedure is to “spoil” the top, cultivate the middle, and lose the bottom. The best reason for following this procedure is the well-known “Pareto principle.” This principle is based on the assumption (nearly always true) that 80 percent of your problems are coming from 20 percent of your customers, and that, conversely, 20 percent of your customers are providing 80 percent of your own profitability and satisfaction. Why not take the energy you are wasting on the bottom 20 percent and transfer that extra time and energy into “spoiling” the top 20 percent? If you do, you can increase your volume with them and turn them from loyal customers to raving fans!
Someone once said, “Life is too short to be dealing regularly with customers that hurt your business and dominate your attention.” Find the customer mix that works for you. Capitalize on the As and Bs, get rid of the Cs and below, and your business will be both more successful and less frustrating.
Lowell H. Lamberton is professor of management at Central Oregon Community College and can be reached at 541/ 383-7714 or firstname.lastname@example.org. Brian Shawver is CEO of SecurityPros and 1987 graduate of the COCC business program. Hecan be contacted at 541/330-0404 or email@example.com