Customer Profiling – how to actively manage your customer base

If you don’t actively manage your customer base, you’ll end up diluting your resources for growth.

This is something I’d like to dig into in more detail following my last post “Survival is not enough – how to accelerate growth”. It’s about knowing what you want.

It’s not unusual for small businesses to end up with a diverse range of customers. In the early phase of growth, the driver is to get business in – sometimes of any description as long as it pays! There comes a point though where there is increasing value in defining one’s niche. That can come out of consciously seeking to target a particular niche, or from analysing where the business is already attracting the best customers, or a combination of the two.

When working with clients I suggest the starting place is to brainstorm a list of criteria that would describe your ideal customer or client. For instance, the list might look something like:

•    Company size (Revenue/Profits/Employees/Number of sites)
•    Location(s)
•    Sector (ideally one that’s growing)
•    Importance of your business to them
•    Margin/profitability of their business to you
•    Payment terms and track record
•    Good to work with (e.g. professional, challenging, innovative, mutual respect)
•    Refers other business
•    Multiple contacts (i.e. your relationship is not dependent on just one person)

The points can be subdivided if required. You want your list to capture the essence of what you’re after without becoming too complex.

The next step is to score all your existing customers on a 0-10 scale for each point. Involve all relevant people in the process – they may well have observations of significance. I recall, from my earlier career in the auto industry, how a logistics company would rate the suppliers it was collecting material from on aspects such as whether goods were available on time for pick up, whether they were stored correctly and so on. The lorry driver or “route manager” was continually collecting intelligence and feeding it back to base.

The kind of things that typically emerge are that whilst one customer might score very high on the value of business, they are so difficult to deal with that they leave staff feeling frustrated and stressed out. Or perhaps there’s good business to be had with this client, but they’re poor payers. Or it may be that they are just too small to be able to take the kind of products and services you’re now targeting.
The value of this exercise is that it flushes out the experiences and anecdotes from everyone and helps you collate the overall picture.

For the lower scoring customers, the question is, how might we improve some of the scores?  For instance, if there are payment issues, when did you actually discuss that with them (and not just get your credit controller to chase them yet again)? What would it take to transform this customer into an ideal one?

If having explored all the options to improve things through good account management, you might decide that whilst you won’t turn down further business from this customer, you will actively seek business from other clients (existing or new) and prepare the ground to walk away in the medium term.

For the top customers, again good account management can be used to improve their scores and look for additional business opportunities, for instance by exploring opportunities with other companies in their group.

Once you’ve explored the options to do more with your best customers, it’s time to look at how to get more customers fitting the profile.

With a detailed profile, some basic market research to establish how many more of them there might be in your target area is much easier. Once you can establish specific companies on your target list, you can use a variety of networking techniques to seek out direct contacts.

Some hazards to look out for: I’ve seen cases where a business has picked up some great clients in the past from personal contacts, and they’ve managed to complete deals without any major competition. However, markets can change.

I came across a travel company recently that had been growing successfully but it was hit by two things: firstly existing clients wanted to carry out competitive re-tendering of contracts – totally focused on price; and secondly, as it was now seeking bigger clients, tendering was often their preferred procurement approach. Unfortunately, the company had little experience in tendering because they’d been used to relying on personal contacts.

So think through the implications of any new approaches, and keep an eye on the trends you pick up from your customers. Having a comprehensive profile and regular checks against it will allow you to actively manage your customer base and focus your resources where they’ll be most effective.