More customers, or good customers?

Sales and marketing can be a numbers game: the more leads you have, the more you’re likely to convert to customers. But could a focus on collecting lots of leads have a detrimental effect on your business? Sue Davenport, Liniar’s marketing director, discusses why quality is usually better than quantity.

Whatever your business type, we all need customers. When you’re first starting out, your goal is most likely to find anyone who wants to buy what you sell, as you can’t afford to be too fussy.

But as your company grows, the quality of your customer base can often make or break your success – so how can you make sure you’re attracting the right type of customer? And more crucially, should you think about ‘firing’ customers who aren’t adding value to your business?

The first step is to define what your ideal customer might look like. This will be different for every company, but there are probably some common areas to think about:

Financial status. Is this person or company a good credit risk? If not – but you still want to trade with them – can you agree payment up front? If an existing customer starts to fall behind on payments, this could be a warning sign to look at your financial exposure, in case the worst should happen.

Core values. This can be contentious, and matters less in a larger company, but it’s important to share similar values to the people you do business with. Having customers aligned to your own vision who can help to share and spread the word can be worth their weight in gold.

Company size. Too small and they may struggle to pay your bills on time. Start-ups are always risky, but worth investing in for the right customer, as you may be able to help them to grow alongside you. Too big, and they can become too dominant, taking up too much time to service, both for you and your team.

Appreciation. Do all of your customers appreciate what you do and see the value in it? If they see you as a commodity, and have a wide choice of other options, they’re unlikely to appreciate your product or service and will be less loyal. Find customers who see the value in your offering and consider it unique.

Confidence. If your customer is confident enough in their own business to introduce you to other business opportunities, or help promote you by giving you a testimonial or a case study, they can add real value. Help them to see the bigger picture, rather than worrying about potential competition.

Hassle factor. Some customers are more ‘needy’ than others. How much of your or your team’s time is taken up by having to deal with their queries and generally servicing their account? Compare this to a customer who happily places regular orders with minimal fuss. Which would you rather deal with?

Customer analysis. Once you’ve defined what a perfect customer is for your business, take a look at your existing customer base. If you can, rank them in order, from good to bad, and take a look at the bottom 20%. Any surprises there?

Now (if you’re able to analyse your sales to that level of detail) compare the margin you make from each customer. Highlight the lowest margin customers, and if they correlate with the ‘worst’ according to your first list, it might be time to do something about it.

Parting ways. Before parting company with any customer, it’s worth exploring whether anything could be done to salvage the relationship. Perhaps you could increase their prices to increase margin, or to cover the additional time and effort it takes to service their account? Maybe it’s a personality clash – is there someone else who could deal with the account?

Honesty is key. If you feel you’re not a good fit for each other, let them know. Listen to their side of the story – maybe they are willing to accept a different product or service.

If you do decide to move on, you could help smooth the process by referring them to a competitor who may be better placed to service their needs. Give them plenty of notice and keep things positive.

Explain what the separation process and next steps will consist of, and manage their expectations throughout – they may even recommend you to others in the future!

Get more of the right customers. Once you’ve gone through the process of defining the ideal customer, it makes sense to ensure all of your future marketing material is tailored towards them.

You could even go so far as to specify the type of customer you’d like to meet – for example: “We’re looking for forward-thinking installers looking to grow their business” – to send a clear message.

Whenever someone makes it onto your horizon as a potential prospect, put checks in place before you invest time and money in sending out a sales rep to see them. If the relevant people in your organisation are aware of the initial ‘back office’ detective work as part of your sales process, it will help ensure their efforts are spent with the right people and stop them chasing after customers who aren’t a good fit.

A fine balance. So, in an ideal world, you’d be working with customers who pay their bills on time, are on the same wavelength when it comes to business philosophy, and who aren’t too small to survive or too big to dominate you.

They’d also appreciate what you do for them, have confidence in themselves and don’t give you any unnecessary hassle.

That would be perfect, but we all know that we don’t live in an ideal world, unfortunately. But if you can manage your customer base to represent something close to those guidelines then it should make for a happy trading relationship.