How to determine good customers from bad customers (Part 1)
One of the most important responsibilities of start-up entrepreneurs and businessmen once their businesses are up and running is to continually find new customers for their new company formation. It is a responsibility that all business owners take seriously and is a source of daily goals especially if you want your business to grow and remain profitable.
But it is a little known fact that by being more discerning of your existing customers you can still achieve a measure of your financial goals (by increasing profits) while having the side effect of boosting your staff’s morale and making your business more efficient.
Here is a simple guide that will help in your discernment of good customers and bad customers:
Give more attention to your best customers and not your worst customers
It is a common practice for business owners and their staff to pay attention to a bad customer more than a good customer – it is human nature after all. We focus our best efforts and attention on customers who have the loudest voice (those who practically shout) and even though it doesn’t really happen as often, the classic 80/20 rule usually holds in these cases.
The 80/20 rule stipulates that 80 per cent of a particular company’s attention is usually focused on just 20 percent of the customers. This is not a problem in and of itself but it does become one when you consider what comprises the 20 per cent that does get your attention. This is usually the group that you would consider your worst customers. These are people who consume so much of your time but generate such a small profit.
What is worse is that bad customers end up costing you, too.
The additional resources you spend on bad clients could have been of far better use elsewhere:
- you could have used that expenditure attracting good clients instead in the form of marketing activities
- You could have further elevated the level of service for your existing, more profitable customers
- You could keep the same level of service given to good customers but you can cut costs by removing the “expensive” clients in order to improve profit margins.
Bad customers have a negative effect on your staff and your business
Bad customers also put a serious dent on employee morale and also damages your business image. The worst clients do this because they complain more, are more demanding, can be potentially awkward, and do not value what you do. Ultimately, working with bad clients stops becoming a source of pleasure and becomes more of a tedious money-draining chore than anything else. By eliminating bad customers you can uplift your staff’s morale, thus making them more effective in fulfilling their responsibilities. |
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