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New Year's Resolution: Pick the Right Customers

January 1, 2011

With the New Year and a renewed economy come fresh opportunities and a perfect time for some reflection. Typically, we spend so much time measuring how well we’re serving customers that we can sometimes forget to measure how well our customers are serving us. This is a critical part of ongoing success, especially now as our climb out of the recession accelerates. Where you spend resources is particularly important as you now may have less competitors and more opportunity to chase. Picking the right places to focus makes a big difference.

Quick Customer Litmus Test

Some customers might seem like they’re worth a Herculean effort, and they might be, but it’s hard to quantify this until you take a hard look at all of your customers and prospective customers. Here’s a simplistic to start the process of building a customer strategy for spending more or less resources on certain

Avoid the Teasers
Teasers are big prospects with whom you have ongoing contact, who seem to want to foster a relationship with your company, but continue to find arbitrary, unclear reasons to avoid giving you their business. Wanting to impress and win a big order, you continue spending time and resources investigating opportunities, generating creative business approaches and submitting time-consuming bids in a futile attempt to close the work.Without clearly defined measures you may come to find that you’re simply being used as a “stick” to keep the prospect’s preferred supplier honest, selling to someone who isn’t able to give you an order, or for other reasons that serve the prospect. If you find that you are in this cycle, break it. You have nothing to lose by going over your contact’s head and holding meetings with key decision-makers to press them to define the hurdles and timeline, that given your success, will result in a purchase agreement.
If you meet these established requirements an order should be forthcoming. If not, then politely walk a—fire them, let them find another stick. Refocus your resources on growing your business with existing customers or finding other, real prospects. And next time, establish the rules before the game starts.

customers. To start, bring together key individuals who can provide an opinion based on direct experience as well as be able to support it with data when the time comes to dig deeper. You can quickly facilitate this by projecting an Excel spreadsheet on a conference room wall. Collective participation is necessary, so ensure that everyone has a voice. Depending on how you break up your business, you may need to measure customers within sets based on market or product groups.

1) List your customers and new prospects; include how long you’ve been serving existing customers, the revenue earned and a summary of costs for each. Keep it simple, since this is meant to be a quick exercise, not a deep dive.

2) Next, list what your customers’ collectively expect from your company and what role you play in meeting their business goals. Objectively rate how well you serve these needs and assign an overall score for each customer.

3) Now, list expectations that you have from customers. Identify what you need from them in order to meet your business goals. Include intangibles such as ‘good chemistry’ and ‘aggravation factors’. Now, rate how well each of your customers delivers on meeting your needs and assign an overall score for each.

4) Review the initial results to see how compatible you are with each customer and what the total ‘cost’ is of doing business with them. Now, identify which customers are good, moderate or poor matches with you.

5) Identify and list the short and long term opportunities that exist with each customer and decide where you feel they fall into one of the following lifecycle categories: a growth potential for your future; in maintenance mode to keep revenue flowing; or ripe for being replaced.

6) Lastly, for each lifecycle category, order customers from top/down and pick the top 5 to 10, then determine if they’re moving from their current position to another, (ie. from growth to maintenance). You’re now at a point to be able to dig deeper into financials and supporting data as you generate strategies and assign support resources to nurture those customers and prospects representing growth opportunities. Move towards replacing nonperformers, while ensuring that you protect and maintain those in the middle. Having a strategy in mind for each customer lets you better assign resources to ensure that you’re optimizing the effort of each individual in your employment. Keep in mind that,in many cases, eliminating customers can take time and should be approached without burning bridges. However, sometimes, as in the sidebar example, moving a quickly is appropriate.

We all are in business to meet a set of goals intended to have beneficial outcomes that we feel are worth spending our days, careers and life’s work pursuing. Let’s refine this effort and simply refer to it as our dream. Customer relationships are costly to foster, expensive to maintain and draw resources from every part of our business and lives, but these same relationships fuel our dreams. Any time we waste focusing on bad customer matches is time a from opportunities and customers who may offer greater potential reward. Without regularly checking how our customers are serving us, we can get caught up pursuing the dreams of some less deserving customers and lose focus of what best contributes to our success. So in 2011, whose dream are you working on?

See sidebar example. MF

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