You probably know the average age, education, income and profitability of your average customer. However, former U.S. Labor Secretary Robert Reich cautioned about putting too much faith in the concept of averages. “You know,” Reich said, puffing up his 4”™, 10” frame, “Shaquille O”™Neal and I have an average height of six feet.”
Because your best and your worst customers balance out to an average value for your business, it would be a tremendous mistake to treat them both the same. You can respectfully treat your customers as people who have very different needs and who make widely different contributions to your profits.
The Praeto Principle, also known as the 80-20 rule, states that, “20 percent of your customers bring you 80 percent of your profits. While most businesses can help their customers find everything that they have in stock, they seldom stock everything their best customers want to find.
To maximize market potential, recognize customer differences and work to meet their needs, provided you can satisfy them and still profit. Dr. Frank I. Luntz, author of “What Americans Really Want”¦Really,” reminds us that, “One-third of Americans say that customer service is worse at major companies than it was five years ago.”
So who are your best customers, that valuable 20 percent? Can they find the products and get the level of service they want at your business? In many cases, the best customers receive the least attention. A large bank discovered that it would take 1,400 average customers to replace its largest customer, but no one knew whom that was.
Their best customer had never complained or had a credit problem. He had been ignored! Small customers causing the most problems were getting the most service. Consider these questions: What kinds of customers do we want? What types of service do they expect? Which customers are costing us too much to service? What quality improvements will bring value?
A dentist, with a children”™s practice, thought improved service would be a larger waiting room for the mothers. It was added cost without value because it was discovered that mothers would rather run errands in the mall next door. Adding value entailed giving mothers beepers and paging when an appointment was over.
Although all customers are not equally contributing to your profits, are they all being treated equally? Many businesses are target marketing to customers based on the profits they bring and focus on delivering the right service to the right customers, not to everyone.
You can only provide great service if you know which customers you are going after and what they want. According to Luntz, one of the highest priorities for women is more time. “From getting the kids up in the morning to paying the bills at night, women shoulder the majority of family responsibilities and household chores, even though the vast majority work outside the home. They have little time for themselves and they crave it.”
The level of service quality also depends on the customer you want to serve. Nordstrom offers dazzling service for a small target market that is willing to pay for it. On the other hand, Walmart captures the mass market by increasing value without increasing service. Both are successful.
There is no average customer, there are only individual customers who can either add to or take away from your bottom line. Know what kinds of customers you want and what types of products or services they desire. Determine which customers are costing too much to service and adjust your service level to make them profitable or send them to the competition.
Joe Murtagh is The DreamSpeaker, an international keynote speaker, meeting facilitator and business trainer. For questions or comments, contact Joe@TheDreamSpeaker.com, TheDreamSpeaker.com or call (800) 239-0058.
