Ever since the first day I stepped into the marketing class of an exceptionally caustic professor, I was told that ‘A Customer is God’. In fact Peter Drucker, The Grand Father of Modern Marketing explicitly states that “The Purpose of a business is to create a customer”. Now that is all good and nice. In fact it’s one of those ideal, lofty ambitions which get lapped up by newbie B-School babas.
To be fair, it makes intrinsic sense to not only increase the number of customers but also revenue per customer, to increase overall revenue and profitability. Once we get to Customer Lifetime Value (CLV) we find it to be just one of those obvious universal truths. If you want to make more money and more profits, sell more to existing customers and create new ones. Basically aim for a bigger piece in the pie of market share. Or better yet, increase the pie.
But just like all ‘Universal Truths’ this one is simple… and yet complicated.
Customers aren’t only those who pick up soaps and toothpaste at the store. They are also those who subscribe to services, become clients and (in a way) are those serviced by social businesses or NGOs.
So our relationship with customers isn’t just based at the moment of transaction. It’s a much longer (and complicated) relationship since products and services have longer lasting benefits and effects than just the moment of transaction.
Sooner or later, your customers will demand more. Which is good since that’s the fuel for great innovation. Unfortunately all customers don’t want the same thing. They all want new features, services, add-ons, discounts etc but since our individual needs are different; our wants from our products/services are different too.
By the classical definition of Peter Drucker, a business should then go ahead and fulfil these demands to get new customers. Sounds a little difficult, if not absurd. Your costs of production, servicing, marketing etc will go through the roof. But the biggest hit will be on the image of your brand and your company. Because now no one knows what you stand for.
You are now Brand Confused. Diluted. Spread Thin. On your way down.
So what can startups do now?
1. Remember the 80/20 rule. 20% of customers lead to 80% of profits and revenues. My advice is to get rid of the last 20%. They are pulling you down.
2. Take a Stand. Understand the future. Make products/service based on a good understanding of what people want and what they may want. Take a stand and refuse to go in any other direction, unless heavy evidence suggests otherwise.
3. Listen but don’t lose sleep. It takes a certain kind of entrepreneur to listen to criticism and take judgement on what to do and what not to. Sometimes it’s easy to get overwhelmed by a hundred people telling you that they want a hundred different things. But it’s important to take a call on what you feel is right. Just remember, a carriage runs well only when all horses are pointed in the same direction.
4. Your top 10 list. Conventional wisdom states that one should make the top 10 customers by revenue as the top 10 most important people in the world for a company. I think while one should treat them well, it’s essential to talk to those 10 customers (potential or real) who are creating businesses for the future rather than just now. Your chances of creating a better product/service based on your goals increase drastically when you listen to them.
5. Analyze. Create systems and processes that let you analyze the true cost of doing business with your customers. You could be spending great resources on your customers without making much money. Hell, in most cases you could be losing money. Constantly analyze and try to revive unprofitable relationships. But if they are on the way down. Abort.
6. Don’t hesitate to say Bye. There is a certain hesitation in letting go of a source of income. These customers are usually the ones who give you a migraine and don’t pay you so much for it. What this does is that it takes the 2 most important resources of your company and makes them inefficient. Focus and Time. If there is more you can do with these finite non-scalable resources then one must learn to lose such customers.
7. Be Nice. Now that you are ready to make more revenues, profits, products etc after getting rid of dead weight customers, please note. Be nice to them even after they are no longer your customers. Not because you want to stay in their good books, your reputation might get sullied and that shifting executives may lead to major accounts not coming your way. This is all desirable. You do this because they deserve it and you should genuinely be nice to people who have ever done business with you.
Startup Yapper 