Customer Rating Systems: Which Customers Should You Focus On?
“The customer is always right.” In recent years, this saying has been adopted by many companies to stress their focus on customer service and willingness to do whatever it takes to make sure their customers are happy.
But is the saying really true? Are customers always right in every situation? Of course, the answer is no. And rather than pretending that they are, your business might be better served determining which customers you’d be better off not working with so you can devote more resources to serving your best customers.
Rate Your Customers
One way to do this is to create a customer rating system. Such a system will assign each of your customers a numeric (such as 1, 2 or 3) or alphabetic (such as A, B or C) rating based on what kind of fit they are with your business. For example, an A, B or C customer rating system might look something like this:
“A” customers: These customers are highly profitable for your business and they purchase from you on a consistent basis. They are easy to work with — they’re not overly demanding and are generally very pleased with the quality of your company’s products and services.
“B” customers: These customers are usually profitable for your business and they purchase from you somewhat regularly. They are hit-and-miss, however, when it comes to your relationship with them. Sometimes they are pleased with your business, but sometimes they can be difficult to work with.
“C” customers: These customers are marginally profitable or unprofitable for your business. Their purchasing patterns are inconsistent, which makes cash flow forecasting tricky. And they can be very difficult to work with, often complaining about your products and services and trying to return products that aren’t really damaged or defective.
Allocate Your Resources
Once you’ve placed all of your customers in the A, B or C bucket, it’s time to make some strategic decisions about how you allocate corporate resources to serving them.
You will generally want to devote whatever resources are required to make sure your A customers receive the highest level of product and service quality from your business at all times. If there’s any customer who is “always right,” it’s these customers.
In addition, you may also want to look for more opportunities to work with these customers. For example, can you develop new products and services that would be appealing to them, or cross-sell existing products and services to them?
Similarly, you will probably want to do all you can to ensure that most of your B customers are satisfied as well. The key question with these customers: What can you do to move them into the A customer bucket where they will generate more sales and profits for your company?
What About the C Customers?
Not surprisingly, the customers in your C bucket will present the greatest challenge for your business. You have two main choices with these customers: Either try to move them into the B or A buckets or get rid of them.
If you decide to try to salvage these customers, consider the impact these efforts could have on your other customers. Diverting resources away from serving A and B customers to try to placate C customers could damage relationships with some of your best customers — something you should try to avoid at all costs.
Conversely, you might decide to “fire” some or all of your C customers. This can be a hard decision to make, but sometimes “addition by subtraction” is the best thing for your company. Give these customers enough advance notice so they can try to find an alternate product or service provider. And try not to burn any bridges — you never know when your paths might cross again in the future.
Set aside time now to create and implement your own customer rating system. This could help lay the groundwork for a more productive and profitable year for your business.