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July 20, 2007
Spending Smart: Wooing the Right Customers
A waiter has taken flak from a table of elderly ladies during a two-hour luncheon. They’ve changed their minds, complained, reshuffled their orders, and made the server’s life miserable. When they finally ask for the check, he delivers it with the question, “Was anything all right?”
In direct marketing, few enterprises understand that it’s more profitable to market to your best customers than to attract the millions of potential customers who aren’t yet buying your product or service – or even those infrequent buyers.
Let’s pop open your database and take a peek at The Good, The Bad, and The Ugly. It may not be a nice thing to say, but in truth, most of us have a mix of all three.
• Your good customers are the ones who buy your product time and again. They tell their friends, family and colleagues about you, acting as spokespeople. You love these customers. If you could, you’d clone them.
• The bad customers are the ones that buy just once; then they just disappear. They’re often cherry pickers – they change mobile services over and over, lured by cheaper rates and bigger incentives; they hop from bank to bank, chasing higher interest rates and free toaster ovens.
• And the ugly customers? Don't get me started! They’re never satisfied. They’re never going to be. They cost more than they’re worth. Let them drift over to your competitors, and be thankful.
Successful companies identify and satisfy their ideal customers, doing everything they can to please and retain them. Simply stated, you should target most of your marketing to these best customers, developing relationships with them, bringing them closer to loyalty – and advocacy.
Example: A telecom operator in South India, struggling with high customer churn, planned to develop a blanket rewards and relationship program with mobile subscribers – but realized that rewarding all subscribers may not be the answer.
Why? The bottom 28% of their subscribers were actually eating up half the profits generated by the others, in operational and servicing costs. Another 12% did not generate any profits. And 30% were only slightly profitable.
By deciding to focus on this top 30%, the operator saved 70% of his marketing budget, and was able to retain 98% of these high end customers in a market that was witnessing over 50% churn.
Bottom Line: It can actually be more profitable to lose bad customers than to gain new ones! The Bad and the Ugly cost more money to service than they generate.
Retaining the right customers is common sense. And one day, it will be common practice.
Posted by MCorp. at 20.07.2007 12:35 | Permalink
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