Scenario: "Dude, we have to cater to all of our customers. Let's send them all super-personal birthday cards on their birthdays. And, super-duper-personal Thanksgiving cards. Billions! Yay! Yay!" Conventional wisdom says: "Treat everybody that comes through your door equally well!" We say: Blah! Why?
- 20% of your customers make up the bulk of your profits (~80%).
- 80% of your customers make up a lousy percentage of your profits (~20%).
Yes, your other 80% is important -- and you hafta treat them well; but if you're doing it at the expense of your top customers, take caution: When you focus equally on both camps, you get mutha $@!%&# problems by leaving mutha $@!%&# profits on the table. Profits from your top 20%, that is.
Why Catering to Everybody Sucks
What is your booty essentially doing when you're catering to everybody? You're working ridiculously harder to generate a much smaller pot of Benjamins. That is, you're expending more time, resources, headaches to serve a group of customers that give you minimal results -- relative to your super-extraordinary customers.
Consider Cheap-Ass Chappy.
- You're providing marketing services to his "super-awesome" business.
- Chappy needs five of your company's top "personal" marketing consultants because he thinks his business is "The Bomb!"
- Really, Chappy's business is a pathetic piece of scam trash that barely generates any profit to feed his self-absorbed narcissistic personality. So, he rarely pays on time -- if ever.
- He needs you to hand-hold him all-day, everyday -- wasting your (1) resources, and (2) precious time.
- He needs you to explain things to him five times because he "forgot."
- He tries to squeeze out every frickin' penny from you -- so that takes him even longer to pay you.
- Profits you generate: $2,000
Now, Consider Kick-Ass Client Tomas.
- You're providing marketing services to Tomas's company.
- Tomas runs a $10 million financial service company filled with super-happy clients. They love his service.
- Tomas doesn't micro-manage you. He lets you do what you do best, and gives awesome input.
- He pays you on time, orders more services from you, provides you with fresh leads, and even gives you financial advice.
- Profits you generate: $8,000
Relative to Cheap-Ass Chappy, Tomas took less of your time, caused you less headaches, kept your morale super-upbeat, conserved your people resources, and drove you to kick major booty everyday. Most importantly, Tomas gave you a much bigger bang for your resources. What's the key for your badass, then? (1) Drive away customers like Chappy (more on this later), and (2) start finding more customers like Tomas.
Why Catering to a Certain Few Rocks
When you focus on the few that create the bulk of your bottom line, two things happen:
1. You sustain your morale to kick-booty everyday.
Ever worked with a viciously-demanding customer that pays you pennies? Not too fun. Of course, part of your brain thinks: "If I can just solve Chappy's problems, I'll be okay!" On the surface, it sounds like that. But, dealing with bad customers cuts much deeper. Bad customers gradually shrivel away 'kicking-ass-mentality' level by pounding your morale each-and-every-time they demand something from you.
2. You start fattening your profits to grow your business.
Think of it this way: Every single one of your customers has an ROI tag attached. The more you invest in finding and keeping your top clients, the more money you generate. If you attracted more Tomases -- and reduced your Chappys, you'll soon discover how just how profitably sexy your business will be.
"So, how do I know who are my top 20%?"
Ask your badass two questions:
1. "Who are my most profitable clients according to my financial sheets?"
Measure each customer's ROI by the profits they've generated for you this week/month/quarter/lifetime.
2. "Who are my profitably-hidden clients?"
Don't confine yourself strictly to financial docs. Several members of your actual top 20% won't be so profitable on your financial docs; however, they bring with them lucrative associations that make you more profitable. For instance, those associations can include key people connections, a juicy source of referrals, priceless feedback/tips/advice on your business, industry expertise, etc.
"So, how do I serve my best clients?"
Think of it this way: if you only had that top 20%, how would you run your business?
- You'd refine your offerings to suit that sexy 20%.
- You'd innovate like crazy to their needs.
- You'd start helping them reach their mutha $@!$%! goals.
- You'd go the extra 8519417402174 miles for them.
As for the rest of the 80%? Treat them super-good too, but remember: your priority is with the top 20%. You serve them.
The Secret Sauce to It All
Now, you could stick with your current 20/80% customers; but if you really want to kick ass, we'd go further. Ask you super-crazy-badass these two ridiculously awesome questions:
- "How can I attract more customers similar to my top 20%?"
- Or better yet: "How can I reduce more customers like my bottom 80%?"
For instance, consider Chappy in the example above. You want to eliminate customer behaviors like Chappy's. So what do you do? You start:
- hiking up those fees for "personal" marketing consultants (or removing them completely)
- write training manuals so you don't have to repeat yourself a million times
- charge for technical/marketing support so customers like Chappy don't abuse your company's resources
Will Chappy viciously drain your resources in the future? Not likely if you have the right policies in place. That lets your badass focus on your company's juicy top 20%, and equally important: attract more customers like them. The template to get you started:
Top 20% = Juicy good.
Posted on January 07
Next tip »