3 Key Secrets to Targeting Customers that Grow Your Profits
Most of us talk about target customers as a fundamental part of business management—you know who your targets are, right?
As I get to know a client, one thing I usually ask is how do the salespeople decide which leads to follow up on or which phone calls to return first? I assume they use some hierarchy of criteria that defines a target customer to guide them. For the most part, I haven’t found that to be true. They will generally return calls of current or past customers and have specific companies they are trying to sell to that are on their radar. Beyond that, it is rare for a company to know who their best prospects are.
Why does it matter? Because all customers are not created equally. Some buy more, some are more loyal, and maybe most importantly, some are more profitable for you. So as you begin to gather the list of names of potential target companies, it is a good idea to know why they make a great target and how to ensure they will add significantly to your profitability.
There are three key secrets to targeting high-profit customers:
Secret No. 1: Identify Which Prospective Customers You Can Best Serve
Not all customers seek product benefits equally. Some care most about price. Others are looking for a product that meets specific needs and will pay more for it. Still others may buy based on relationship or service. Each of those reflects a different strategy, and if you have developed a strategic plan, you have likely chosen to emphasize one over the others. (If not, read this blog on strategy development and competitive advantage). That means that certain customers will respond best to what you offer, and you want to define the characteristics that describe those types of customers. Maybe it has to do with company size or complexity of solution. Possibly they value total cost over initial price. Perhaps trust matters most of all, and that requires a strong relationship. It is important to understand the variables that the customer you can best serve uses to select the vendors they will select. Those are the high-priority customers for your company. Trying to satisfy a customer who wants the lowest price when your business model is not built on that strategy is a self-defeating prophesy—you might win the customer, but you will lose profits. That is not a success. Be willing to walk away from customers who want what you don’t provide.
Secret No. 2: Define Which Customers Are Profitable
This may sound basic, but many companies don’t know the profitability of an individual customer. Yet, research has proven that 40 percent of just about any business’s customers are unprofitable. (To read more about that, click here). Do you know which customers are profitable for your company? If not, find out. Then discern what sets them apart. Is it the size of their order, what they order, what industry they are in or even what they bundle together when they order? Once you know who is profitable, your goal is to seek more customers like them. Once you know who is not profitable, your goal is to increase their profitability. (For suggestions on how to do that, read this article.) This can have tremendous impact on the absolute dollars of profitability very quickly.
Secret No. 3: Determine Which Customers the Company Can Grow With
The customers who brought you here may or may not be the ones who will get you there. If your business model or strategy has changed, if you have grown substantially, or if market trends and technology have evolved significantly, you may have to rethink your target. Companies in the printing business are rethinking their services and thus their customers. As needs shift to leveraging big data and customized, personalized messaging, printers need new capabilities and need to reach new buyers (i.e. marketing vs. purchasing). Figure out where the growth is, and if you can effectively serve that market (the No. 1 tip) and can make money doing it (the No. 2 tip), you may want to reach out to that segment even if you haven’t previously.
If you want to have great and profitable customers—easy to work with and satisfy, loyal to your offerings, and profitable to work with—then follow these three steps to customer targeting.