Spring Cleaning Series #2: Reassessing Customer Value

Posted by John Veckerelli on Fri, Mar 29, 2013

reassess customer value

In honor of spring, we’re putting together a series of posts to help you tidy up your business activities. Our first post laid out an approach to clean up your contact database. In this post, we address an issue we as business owners occasionally face – reviewing our client roster and reassessing our ability to meet customers' needs.

Are we serving our clients and ourselves?

As business owners, it is necessary to answer these two basic questions:

  1. Are we delighting clients?
  2. And if so, are we doing so profitability?

If the answer is NO to either or both questions, an honest examination is in order– starting with ourselves!

Signs of trouble

It’s easy to fall into the trap of accepting every client that comes your way. This is especially true when you have extra capacity or are going through a soft patch. Staying true to your target markets and core business will help manage the task of delivering customer value, profitably. Achieving a modest profit is essential to deliver great customer value and have fun doing it. Profit drives the ability to reinvest in our people, improve our process, and stay current with the latest best practices.

If an account is unprofitable month to month, or your staff dreads working on the next project, that’s a clear sign you need to take action. Whether you have too much on your plate or a customer just isn’t a good fit for you anymore, sometimes it's best for you and your customer to part ways.

“Being organized and selective in your project list will not only improve your ROI, but also will aid your focus on current projects and help you produce better work in the long run,” offers Hero Design Studio. “You want to make sure you’re taking on new clients for the right reasons, and not simply because they’re there to take on.”

More Money, More Problems…Sort of.

Okay, so the extra money isn’t exactly the culprit here, but taking on too many clients too quickly can be detrimental to the business. If you're spending so much time on a particular account at the expense of others, you run the risk of not meeting the goals of all clients.

Finding the right balance of growth while not impeding your ability to deliver consistent value is what we seek. When out of balance, it doesn’t mean getting rid of the client that gives you the most work, necessarily (if the client remains a great fit, you should be willing to put in the time and effort); rather, paring the ones that are no longer a fit or require an inordinate amount of effort to please. Some signals to look for are customers that constantly change their requirements, don’t communicate, don’t pay, etc. You'll need to determine your own criteria for who is or isn’t worth your time; the important thing is to have those standards.

“Your time might be better spent deepening a relationship with one of your best customers, rather than running yourself ragged trying to keep that challenging customer happy,” says Al Davidson in an article for MarketingProfs.

That being said, you also don’t want to kick a client to the curb at the first sign of a problem. First, see what you can do to make things better for both you and them. Would it help to communicate more frequently? Would the customer prefer more or different details in their progress report?

“Whatever the customer needs, find out if it's worth it to your company to deliver it. If the requests are unreasonable or too time-intensive or too costly, the better choice might be to say goodbye to that customer and move on,” says Davidson.

To Be or Not To Be?

How you identify yourself as a business will help determine the type of clients you attract. Your marketing strategy and pricing should reflect the type of people whose business you hope to gain, says Derrick Wlodarz in a post for Technibble.com. If you pursue every average Joe as a potential client, you are not giving a clear impression of who you are. Conversely, if you are confident in your company’s identity and consistent in your messaging, the right type of customer will come to you.

Do It with Dignity

If you do decide to part ways with a client, make sure you do so on the best terms possible. The point is to learn as much as you can from a strained relationship. And don't forget to look in the mirror FIRST. The answer may be staring at you. Explain that you enjoyed working with them, but things have changed and their needs and your capabilities are no longer compatible. If right for the situation, refer them to another company in your network that might be a better fit for their needs.

Here are some questions to help you assess your client relations:

  1. How important is this client to your overall success? If they are in your sweet spot, what can you learn to fine tune your approach?
  2. Can you find solutions to the problems you are having with this customer?
  3. Do you have the time to devote to this client?
  4. How can you change your approach to improve your value and generate a profit?
  5. Is your service meeting the cusomer's needs? Can it?
  6. Is this project moving your company in a direction you want it to go?
  7. Can this client help you extend your network or brand awareness?
  8. Is the customer making you rethink your career path?

Topics: Business Insights, Client Relations