Roundup: Making the most of your customers
I often hear product managers complaining that they don’t have enough time to listen to customer feedback, but in practical terms the opposite may be true: you may already be listening too much!
OK, not quite. But not all customers are created equal, and not all have the same impact on your bottom line. So start by figuring out where the value lies and how to measure it.
A couple years ago, I was talking with a customer, a bank business analyst, and she told me that they had solid data on three clusters of customers – the top tier, who through very high net worth and using multiple bank services brought in 80% of revenues, the broad mainstream tier that collectively brought in 40% of revenues, and — wait, isn’t that 120%? … That’s right, the bottom tier of customers actually lost the bank money.
Remember that the next time someone blithely reminds you that “the customer is always right”.
What can the Pareto Principle do for you? (Laserlike)
…Find out what separates the top segment from the other segments. If you have multiple products, do they buy certain products more than others? Use certain features more than others? Where do they come from and can you tune your marketing to find more customers like your best customers? Does your analytics effort measure overall metrics as well as the health of your business by segment?
Understanding your customer segments can reveal hidden pockets of revenues. Some customers (like the ones with the $10MM of assets in your bank) are obviously valuable. But the smaller yet stable customer may require less hand-holding and do more positive word of mouth for you.
Make Every Customer More Profitable (CIO Insight)
The program certainly helps boost business from high-rollers…but it has also helped Harrah’s identify a profitable segment of customers that it had been under-valuing: the low-rollers, the so-called “retail” or small gamblers who spend no more than $50 per visit, but who represent about 40 percent of Harrah’s business.
Once you know your good customers, how far do you go to make them happy? It’s important to know what you should — and should not — negotiate on.
The Art of Saying No to a Customer Paints a More Profitable Picture (Brews News)
We have found that negotiating with potential buyers, especially on price, never works out well for us. Never… So, engaging in a conversation about price is a waste of our time and even if we successfully negotiated a cheaper price and got the sale, we would not be making a profit which is the point of being in business. And, most importantly, the negotiation process … takes away precious little time that we could be serving customers who are ready and willing to pay our stated price.
For one of my products several years ago, we had a big-name customer lined up to buy it… as long as we removed a feature (forcing consumers to use a more profitable but less user-friendly option). That was a hard lesson that you can’t negotiate on usability. If no one uses your service, it doesn’t matter how much you make per user.
Some more good related reading:
- Making Existing Customers More Profitable
- Five Steps to Understanding Customer Retention
- Customer Profitability
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Tags: 80-20, customers, metrics, prioritization
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