Everyone wants and needs sales to have a profitable and successful business. But, sales from the wrong customers can kill a business. If you doubt me, read Angel Customers and Demon Customers by Larry Selden and Geoffrey Colvin.
What should you look for? Basically, there are two options:
- Low hanging fruit — the most responsive, easiest sale, shortest sales cycle
- High value — the most lucrative, harder sale, longer, requires more thorough sales process so longer sales cycle
How do you decide who is right and who is wrong? Focus on customers who are worth your sales staff’s time and efforts. The right customers have the following four traits. They:
- Add more value than just the dollars they spend.
- Contribute to the reputation of the company by their presence or referrals.
- Are enjoyable to work with.
- Match the culture of the business.
There are major benefits from concentrating on finding and keeping the right customers. If you have hired the right sales staff, they will close more new sales and better sales if they can point to and use what they learned from existing “right” customers. They can get upsell and get new sales from existing and even former customers when they are starting from the best.
If you are worried about reputation and the value of the company, the right customers are your best answer. With the right sales process and continued high touch attention and reinforcement, they bring in others like them. Why? Because, they can’t resist bragging or sharing their good fortune.
You will get customers who are not a good fit. If they are really a bad fit, even if money is tight, fire them. They take energy away that is not replaceable. They take time that you can’t afford to waste. They are not satisfied and they attract others like them.
A Case Study of Angel and Demon Customers is Still Relevant
Wall Street Journal staff reporter Gary McWilliams, in January 2005, wrote an article, The Customer Isn’t Always Right on Best Buy’s efforts to attract and keep the right customers. Its CEO Brad Anderson said he wanted to separate “angel” customers from the “devils”, the 20% that drove profits down.
To do this, its store clerks were given hours of training in how to identify desirable customers according to their shopping preferences and behavior. This was based on an examination of sales records and demographic data and sleuthing through computer databases to identify good and bad customers.
Other changes were also put in place. To lure the high-spenders, it stocked more merchandise and provided more appealing service. To deter the undesirables, it cut back on promotions and sales tactics that tend to draw them, trimmed them from marketing mailing lists, changed store policies based on the “bad behavior” of “demon” customers that cost the stores time and money. The trickiest challenge was to deter bad customers without turning off good ones. But, the results were worth it, with sales gains running nearly double of what they were before this policy was put in place.
Certainly, the economic situation has changed. But the premise remains valid. In good times or bad, focus on the best and forget the rest. You may not be as big as Best Buy or think like a mass retailer but can you afford 20% losses from the wrong customers?
What can you add to this discussion?
What are you doing to protect your business from attracting the wrong prospects and keeping the wrong customers? Please share your successes so that we can all benefit from what you have learned. I would like to do a followup post based on reader input.