The Wall Street Journal has an article that looks at how some companies are cutting off the customer that’s costing the company more money than profit. Last year, many companies would work with their customers, offer them discounts or work with them on payment options. This year, however, many smaller companies are finding that by cutting off customers who don’t pay actually increases their profit, as they have more time to spend with those customers who are making their payments.
Do you agree with this? Have you had to break relations with some of your needy customers in order to create a better supplier for your revenue-generating customers? How do you feel about this approach to business from a customer service perspective?
At Customers Think, they’ve addressed a common issue — why does customer profitability decrease as sales revenue increases? In today’s current economic environment, companies are trying to keep up sales, which often leads to special buying programs, prizes, rebates, and quality purchase discounts to sell to more customers. The customers who buy at this time are the customers who only buy when the prices are low, and rarely lead to a consistent profit. The price slashing cycle leads to the same number of products sold, but a decreased amount of revenue, creating a vicious cycle. Attracting new customers is necessary, but customers who do not turn a profit are problematic.
What do you think? Have you come across this in your customer base?
At the Top Marketing Blog, they recently looked into why some companies who are looking to develop customer centricity may be failing.
-They may be failing to understand the customer. Who is your customer? Do you realize that 20% of your customer base generates 80% of your profit?
-They may be failing to support an external customer centric strategy by not having an internal customer centric strategy. It’s important to have your employees at the center of your company first so they can then turn into the face of your customer-centric company.
- They may be failing to identify the moment of truth. Companies may have problems measuring their customer service strategies.
At the 1 to 1 blog, Ginger Conlin took time to explain her most recent encounter with customer service and companies monitoring the internet. Even though it’s hard to measure social media and see the monetary effects of these tools immediately, Conlin suggests that it’s important to invest in them anyway for the long term revenue growth by keeping your current customers. Other benefits of investing in customer service on the internet are feedback gathering, responding to concerns, the ability to share content, and the ability to increase customer retention. We’ve touched on reaching out to your customers through the interent with a recent post about Comcast, and Conlin shared her experience with Citibank. Have you had a personal experience with this?