CRM is All About Managing Customers for Optimum Profitability

We have been discussing customer persona, better service and customer centric approach in our earlier articles. Since we know Customer Relationship Management (CRM) is all about managing customer for optimum profitability.

One-Size-Does-Not-Fit-All Approach

Definitely you will be agree with me that you cannot send same personalized message to multiple contact/customers. Different customer has different persona and need different treatment. From lead nurturing to Sales and after sale service we learn customer behavior we get use-to a bit with too; but we have give it back for letting the customer know that we understand what he want. Once we make a strong bond with customer we can offer new product and service and ask for word of mouth publicity.

To make things simple, I want to think about how we should treat three different types of customers: profitable customers you can serve well, unprofitable customers you can’t serve well and a largely ignored type, bad customers that nobody deserves.

Understanding Different Customer Types

Let’s simplify CRM strategies by categorizing customers into three broad types:

• The Good: Profitable Customers You Can Serve Well
• The Bad: Unprofitable Customers You Can’t Serve Well
• The Ugly: Awful Customers Nobody Deserves

The Good: Profitable Customers You Can Serve Well

Every company needs profitable customers. Although it varies from industry to industry, approx. 20% of the most profitable customers typically provide 80% of most companies’ profits. What not every manager realises is that although profitability can be influenced in the short-term by increasing prices or reducing costs, in the longer-term it is driven by serving good customers better than competitors. Not all customers though, just those whose needs are most closely matched by the service the company can provide profitably.

The key to nurturing these customers is:

• Understanding their pain points and offering value driven solutions
• Consistent communication and personalized engagement
• Excellent customer service to increase retention and loyalty
• Upselling and cross selling relevant products/services

When businesses serve profitable customers well, they build relationships that lead to long term revenue growth.

Read Blog : The Future of CRM Software: Emerging Trends and Best Practices

The Bad: Unprofitable Customers You Can’t Serve Well

Unfortunately, along with the highly profitable customers most companies have unprofitable customers as well. Although there are many reasons why a customer might be unprofitable, it often comes down to a basic mismatch between their needs and the service the company can provide profitably.

Some customers are unprofitable due to:

• Their needs don’t align with the company’s offerings.
• They require too many resources to serve, eroding profit margins.
• They demand discounts making transactions not worth it.

Recognising unprofitable customers and finding ways to either improve their value or phase them out strategically is key. Businesses should ask themselves:

• Can we educate the customer about better products/services?
• Can we make them profitable with slight tweak to service?
• Is it better to part ways amicably if serving them is unsustainable?

Read Blog : Why Is CRM Software The Ideal Solution For Every Small Business?

And The Ugly: Awful Customers Nobody Deserves

As anyone who has worked on the front-line with customers will tell you, there is a certain type of customer you can never satisfy, no matter what you do. And within these already difficult customers there is a further subset that become rude and abusive when they don’t get exactly what they want. Nobody should have to accept these bad customers; they are bad for staff, they are bad for other customers, and they are bad for business.

Companies have a moral duty to support their front-line staff by giving them permission to refuse to serve customers who step over the line. This is an inconvenient truth for many of those who would have us believe ‘the customer is always right’.

Businesses should empower their frontline teams to:

• Set clear boundaries on what behaviour is acceptable.
• Refuse to serve abusive customers.
• Escalate difficult interactions to management for resolution.

Acknowledging and dealing with toxic customer behaviour helps maintain a positive business environment where both employees and valued customers feel respected.

Managing Different Types of Customers

To get the most out of CRM:

• Focus on profitable customers: Serve them well and put their needs first.
• Analyse unprofitable customers: Decide to keep or focus on more profitable customers.
• Set boundaries: Protect staff from abusive customers and give them permission to say no when needed.
• Personalise: Use data and analytics to understand customer behaviour and serve accordingly.
• Continuously evaluate and adjust: Regularly review customer relationships and adjust to maximise profitability.

Conclusion

CRM is all about understanding and segmenting customers by profitability and need. By focusing on profitable customers, analysing unprofitable ones and setting boundaries, you can optimise your CRM and be profitable. Remember, personalisation and continuous evaluation are key to building strong relationships and business success.