It is important to identify the customers you want a lot more of. When analyzing customer databases it is not unusual to find that the majority of revenue is made up of bad customers (e.g. pay poorly, less profitable, complain a lot, hard to service, do not give referrals, etc). This happens mainly because companies find it easier to get the bad customers, particularly when businesses first start and need revenue to survive. As companies grow, they continue to use the excuse of not feeling financially stable enough to afford to focus on getting ideal customers.  However, it is this lack of focus that drains organizational energy and profits. Furthermore, building a base of bad customers leads to creating a negative image in the marketplace as to who you ought to be serving, and thus a company ends up being trapped.

Great companies commit to identifying the best customers and building their strategies around owning that market.  By doing so they find that their operation is custom-built to their ideal customer, so they have a competitive advantage. Ideal customers are loyal so they give referrals to more ideal customers. All of these customers are more profitable than the other bases of customers that might have been easier to get initially. Ultimately it becomes easier to attract the ideal client as you become the leader in the niche. This leads to a more profitable and stable business model.

 

This is an explanation from question #3  from my article “12 Questions You Need To Ask Constantly.”

Executive Coaching

About Howard M. Shore

Howard M. Shore is a Certified Gazelles Coach, Certified Public Accountant Certified Executive Coach, Certified Behavioral Analyst, Certified Values Analyst, and Certified Attributes Index Analyst. He has earned Bachelor and MBA degrees from Florida International University, and completed advanced executive programs at Harvard Law School and the University of Chicago.