Yes, a potential customer is showing interest in your product or service! Enthusiastically you call him, plan an introduction and work towards an order.
Once signed it's time to do the first send invoice. And then the trouble begins. Every day the customer hangs on the line with questions. He demands all the attention. After three months, the first invoice is still outstanding. your team is completely done with this customer.
In short, if only you had said NO!
Having customers is great, but having the wrong customers is terrible. So say NO to customers who don't fit your company.
Define your (least) ideal customer
For two years I was the marketing director of a software company with more than 300,000 daily users. To give my marketing team focus, I started by mapping out the ideal customer.
We used three important criteria:
- Size in turnover and FTE
- Connecting to the pain we solve
For example, we discovered that our ideal customer had more than 100 employees, was active in the manufacturing industry and had to deal with a lot of external regulatory pressure as a result of safety and quality requirements.
Conversations with our service & support desk showed that smaller companies mainly cost money.
Software revenues were already low for customers with fewer than 100 employees. After a few phone calls with our service desk, the margin had also evaporated at these types of companies.
In addition, it proved difficult to keep these customers satisfied. Logical, because we spent less time on this customer group because maintenance conversations were simply not profitable.
By mapping our ideal customer, we immediately had our least ideal customer in mind. That was a very useful by-catch.
Think from the four customer types
The next step brought even more clarity. We divided our customers into different customer types.
We used the model by Derrick Philippe Gosselin.
He distinguishes between
- Transactional customers. These customers have low customer value and little potential for the future. You prefer to have these customers as few as possible. These are typically the customers to say NO to.
- Big customers. This group of customers does have a high customer value, but there is no longer any possibility to further expand their value by means of upsell or deepsell. Because these are valuable customers, it is important to have maintenance conversations with them to ensure continuity.
- Development Clients. This is a very interesting group. This is because there is potential for revenue growth. A development customer can be further expanded by means of upsell or deepsell. Spend time with these customers. Well worth it!
- Strategic Clients. These are the companies that have the most value for your organization, both now and in the future. They generate a lot of turnover, serve as a reference and are your ambassador. Look for ways to expand the cooperation together, for example in a partnership. Deploy whatever it takes to nurture your strategic customers.
When we had divided our customers into these four groups, we had a clear idea of how we should deal with the four customer types. And how we wanted to deal with customers of the first type.
What does a new customer cost?
Finally, it is useful to provide insight into the costs of acquiring a new customer. You can determine this with a simple calculation. First, find out how much you spend on marketing and sales for a particular customer. Divide these annual costs by the annual revenue generated by this customer.
The result provides immediate clarity. Not all customers are right up your alley. Are acquisition costs high and revenues low? Then give this group no more attention or think of ways to lower your acquisition costs for this group.
For example, by further automating your marketing and sales process. If that doesn't work, the trick is to say NO.
Tip: With our QuickScan you can quickly measure your business performance.