From Amstrad to The Apprentice, Alan Sugar has indeed contributed some memorable and some would say, entertaining times to our lives. The phrase ‘you’re fired’ is now inextricably linked to his boardroom showdowns where the candidates fight it out to stay in the running to be the chosen one. It’s certainly harsh, terminal and to the point (the phrase that is) but is probably rarely heard in today’s more evolved, nurturing workplaces – heaven forbid. On the other hand, it’s probably never associated with customers. Why should it? Why on earth would you want to sack your own customers? Well, I’ve got a few good reasons why you might consider it! (click for a video version of this blog)
All animals are equal but some animals are more equal than others
Just like some disgruntled employees, the synergy between the customer and the business can sometimes be awkward or worse still – one sided. The customer, however, might not necessarily see it that way! The reason for this is down to how customers become customers. In many businesses, how customers are attracted and acquired is not, can I say, an exact science - it may resemble more of a lottery. Cast your net wide and you may well reap rewards of a kind but this is through chance rather than design. This is pertinent particularly in the light of online services where the faceless customer is just looking for the lowest price armed with commodity comparisons. OK, this is fine if your business is optimised for this style of business operation but arguably not so for businesses where there is a little more complexity or where customer engagement has some real value. We set out with what we may consider best intentions for customer acquisition but end up with a mixed bag of relationships. We do this because we naively treat all customers as equals and certainly from my perspective, they are not. As George Orwell said in his political allegory, Animal Farm, “All animals are equal, but some animals are more equal than others.” The trick is how you identify the relative importance of each relationship and manage the layers of equality to get the best from your customers.
Pareto still rules
I have waxed lyrical about Pareto in my previous Blogs and that’s because his 80/20 rule is so predictably accurate for so many commercial situations. For many businesses, most of the effort goes into supporting the vast majority of customers (the 80%) that only bring in a relatively small amount of business (20%). We do our best to look after everyone – regardless of the potential consequences. What we don’t do is fire them if they are costing us more to keep than they are to retain. I have borrowed the expression but of course what I mean by firing customers isn’t quite the same as marching them out the door with the final invoice in their back pocket. Conjures up a great picture though, eh?! What I really mean is that there are ways of managing customer relationships that should satisfy both parties. For example, you might consider a different cost and support model for those who are not profitable. You may even look to re-engineer your business and look to third party relations to deliver a better working model. Blue Sheep did this ten years ago and we never looked back. I’ll explain why in a moment but this is the background.
Money Mapping changed our business
We developed a model which we branded Money Mapping. It delivers the intelligence customers need to determine the value of business relationships based on cold, hard facts and metrics. Using data from the customer’s business and combining this with third party data to enrich the depth and meaningfulness of the information, we are able to create accurate classifications that categorise customers into value segments. These range from Treasure customers at one extreme and Avoid accounts at the other. This enables strategies for both customer retention and acquisition to be developed based on individual needs and relationships. The bottom line is we are able to turn your attention to the 20% of customers that deliver 80% of your business – 80% of the time and directing 80% of your marketing activities at the 20% of prospects that are really worth winning. It’s simple, it’s logical and it works. Money Mapping can increase revenue by over 11% and increase profits by 30%. Now the acid test was applying our own solutions to our own company. We were bold and we did this and the results were to change our strategy.
In the early days at Blue Sheep we provided data sales. As a result, we amassed thousands of customers. Servicing those customers was a challenge. When we applied Money Mapping to our customer base we discovered that most of our time was going into looking after low value business. It was clear that we were inefficient and were focused on trying to be everything to everyone. We made a strategic decision based on the data to work with a partner to outsource all the low value business and to concentrate on what the business was really good at – providing actionable customer insight. It was a resounding success for our partner, our customers and our staff who were now being challenged for the right reasons. This is our most powerful case study as it reflects the passion and belief we have in our ability to rationalise our customer relationships. We didn’t fire anybody – we merely passed them onto an appropriate service that could attend to their needs more cost effectively than we could.
Hire or Fire? It’s your choice!
For me personally, it was a eureka moment - an opportunity to make a positive change based on our own data analysis. We never fired a single customer but realised that it was costing us more to look after some customers than it was to sell to them. It was unsustainable. I have learnt that customers, like Orwell’s ‘animals’, are not equal in every sense. They can’t be because they represent different values to your business. So, I challenge you to bring all of your customers to the boardroom, ask some delving questions and then decide which of them is going to get fired! Alternatively, Money Mapping can do the job for you!