Playing Favorites: Identify Your Best Customers

Entrereueur/Business on the Main
By Randy Myers | October 25, 2010

Devote yourself to keeping your best customers happy and watch your business grow.

Let's face it. We all have our favorite customers -- the ones who pay promptly, handle problems respectfully and, most important, give us repeat business. So why waste our time on any other kind?

It's impossible, of course, to avoid every problem customer -- the habitually poor planner, the late payer, the perpetual complainer -- since it can take time for their worst traits to surface. And, at the end of the day, we need their business. Still, it's important to minimize the time we waste on these difficult customers and maximize the time we spend catering to the pleasant and profitable -- the ones who drive our success and satisfaction.

The first step is to identify your best customers (if you don't already know) -- and then devote yourself to keeping them utterly delighted with your goods or services. Over time, this will help grow your business

"This is hugely important," says Wendy Rogers, who with her husband, Hal Kunnen, owns the HouseMaster home and termite inspection franchise in Phoenix, Arizona. "You've already showcased your goods and services to your best customers. In a sense, they're already sold on you. You should work doubly hard to keep them happy because it's much more difficult to get new business than it is to keep old business."

Rogers walks the talk. She and Kunnen get much of their work through referrals from real estate agents, and they make a special effort to keep those who send the most business their way happy. The couple track their referrals in an electronic database and share the results with their marketing director, who travels around the state visiting 10 to 15 real estate offices each day. When he visits a repeat "customer," he'll leave the agent some educational literature and a personal, handwritten thank-you note. Rogers and Kunnen also go to extra lengths to accommodate these valued customers, whether that means responding quickly to last-minute inspection requests or helping one of their tech-challenged homeowner clients retrieve an electronic copy of a home-inspection report.

Thanks in part to efforts like these, Rogers and Kunnen generate about 75 percent of their company's revenue through repeat referrals.

They're certainly not alone in harnessing the power of identifying and catering to their best customers. Tony Ellison, who founded the online office supply store Shoplet.com in 1994, has parlayed knowledge about his customer base into rapid growth, too. He reports that from 2001 through 2006 his company's revenues grew at a triple-digit rate. And during the current recession, revenues have continued to grow at double-digit rates.

The way Shoplet.com manages its customers offers lessons for us all. The company uses a mix of commercial and internally developed customer-relationship management software to segment customers by size, industry and profitability. It also sorts them by their shopping characteristics -- impulse buyers, for example, repeat buyers and cherry pickers who purchase only select items that have been aggressively priced. Shoplet.com uses this information to offer special incentives and promotions to its best customers, including exclusive coupon codes, a rewards program with invitation-only membership and personalized account-management services.

"We have over 2.5 million customers and have isolated 10 percent that we actively pursue," Ellison says. "This approach has allowed us to develop a model that sustains far more favorable pricing for our best customers."

The next time you find yourself wasting precious time dealing with a problem client, go ahead and resolve the issue at hand if you can. But then consider whether it might make sense to find a way out of the relationship. The time you save will be time you can spend giving your best customers the service they deserve. Over time, your short-term loss should translate into long-term gain.