Should you prioritise high-value clients?
By Adam Blanch
There's no denying some clients are more profitable for your business than others. But should you prioritise high-value clients?
They're those great, profit-making clients that bring in the big bucks, offer repeat business and provide referrals. So do they deserve more time and energy than the little guys? The simple answer is yes, but simple answers are rarely useful for complex issues.
Don't focus solely on ROI
People tend to think about customers in terms of return on investment (ROI), being how much money you have to spend relative to what you earn from them. If this were the criteria for how we prioritise our customers then it would make sense to concentrate on those who spend big and ignore those who don't. But there are pitfalls with this approach.
The problem lies in how we define 'high value'. Is it the person who comes in once a year and bolsters your bottom line by spending up big, or the one who shows up every week and only does a moderate spend that supports a positive cash flow? Is value only measured in spend? What about the low-spending customer who, unbeknownst to you, has referred a significant number of people to your business? Or the customer you fail to look after who then complains about you far and wide or (heaven forbid) gives you a negative online review?
It's best to view customer value in terms of spend, word-of-mouth advertising, loyalty or potential. Once you have identified what type of value they most strongly represent, you can figure out how to turn that into more business with the right strategy.
Think about ROC instead
Another way to think about customers is in terms of return on customer (ROC) – a term coined by business guru Don Peppers more than a decade ago. Within this framework, every customer can be a high-value client because you measure the 'lifetime value' of the customer, not the immediate or short-term transactional value.
If you sign up your regulars to a rewards program, and increase their annual spend by 10 per cent, then you've made a significant improvement to your business. However, your high roller is probably more interested in things that are new and exciting, so a personal call to let them know you've put in a new product line might double their attendance at your business.
You can leverage your low spenders too. They are probably looking for bargains, so hooking them into a special deals programs or a tell-a-friend promotion will mobilise and motivate them. If you have low-spending clients with higher capacity (potential) then you need to figure out what you are not providing and act accordingly.
No matter your strategy, the thing that all customers share is their desire to be treated as important. The more you value them, the more they will value you and reward you for it. The truth is we can never know which customers are going to be the biggest priorities until we get to know them, so every customer is a potential business asset.