Assessing Your Existing Client Base Helps Attract Better Business
Few people like the idea of report cards— students especially—and even teachers can be averse to them. But if you had to grade the quality of your existing customers, how would they rate?
For Shelley F. Hall, principal at Catalytic Management in Stow, MA, the exercise of rating one’s existing client base can be a problem, especially when it comes to defining what, exactly, the term ‘quality customer’ means. “To me, a good customer is one that believes that your value as a company is commensurate with your pricing,” she said. Good customers also believe that your product or service contributes to their business goals, and they need your expertise to help them achieve their objectives.
The problem, said Hall, is that many business owners define good customers as those they make the most money from, those that pay the highest margin, or simply those that are easy to deal with. “The client that you make the most money from—raw revenue, not even margins—if that’s your definition, then you are probably going to have to give up 65 percent of your current customers,” she said. While financial metrics should be part of your rating system, companies cannot afford to stratify the service level that certain clients receive based on how much money they spend with the organization. “What you can do, in order to raise your margin on the clients that may not be paying the higher price, is figure out a lower-cost model for delivery. Your delivery for them has to be less expensive than the delivery of the services that you provide to somebody else.” These customers should not, however, perceive that they are worth less than other clients.
Catherine Shanahan, president of Shanahan Sound and Electronics in Lowell, MA, defines good customers as those who are interested in building relationships. “My best customers are the ones that approach us, and the whole project, as a partnership and as a collaboration,” she said. “The client that approaches you as someone that they have to battle with, or someone that they have to watch every penny with—that’s not the way to approach a new person.” She added that most of her clients have been working with her company for years.
Dave Ferlino, president and CEO at Vistacom, a systems integration firm based in Allentown, PA, noted that many customers have preconceptions about what a systems integrator’s role is. This often has a negative impact on how much they value systems integration services, but he believes that these situations can be transformed. “The way we overcome that is that we bring them to our facility, and we show them, behind the scenes, what happens to deliver a solution to our clients,” he explained. “It provides them with a different perspective. I usually ask our clients, ‘What did you think about us, and our industry, before you came here? What are your thoughts now?’” Most of the time, their responses are dramatically different.
As is the case with rating existing clients, attracting the best-of-the-best in new customers requires—once again—companies to start with their definition of what a good customer is. “You start with that definition, and then you have to build your marketing and sales strategy around attracting them,” Hall said. “With the customers who don’t fit that definition, you just don’t take their business.”
To ensure that new customers are a good fit, Shanahan believes in doing a lot of work up front, at the beginning of the relationship. “In discussing the project during the sales process, we can usually determine whether it’s going to work or not,” she said. “You always want to keep every client, but there are some that you have to tell, right at the very beginning, that it’s not going to work.”
For Ferlino, attracting and nurturing high-quality clients has very little to do with the technology that systems integration firms have to offer. “When it comes to quality customers, you have to think about it from a non-technical perspective,” he said. “You have to understand the value of relationships so that you can engage in discussions about business elements other than price.”
Knowing When It’s Over
While most entrepreneurs hate the thought of turning away business, there are cases where it’s probably best to break up with problematic clients. “When you break up with a customer, it is because the customer doesn’t see the value that you bring to them—they just don’t get it,” said Shelley F. Hall, of Catalytic Management in Stow, MA. This often happens when it seems that no matter what you do, the client is always unhappy. “If that is the case—and you’ve honestly examined whether or not you are doing the best you can – then you have to have a heart-toheart and say, ‘I don’t seem able to give you what you need. Maybe it’s time that we part ways, and you have an opportunity to find another partner.’” Oftentimes, the customer will respond by saying that they really do want to work with you, which mandates a discussion about how both parties can work together more effectively. “Sometimes that type of meeting is a really good thing, and the relationship begins to improve after that.”
Carolyn Heinze is a freelance writer/ editor.