Choose your customers...

One of the most common things I hear from small businesses is that (a) they serve everyone; (b) they accept business from everyone equally and that (c) they have "dozens or even hundreds of competitors".  Are these three comments related? I think they are.  More worringly, they point to a misconception that is costing many owners both time and money.

The problem is that a business cannot serve every customers.  Even if you try, you're certainly missing a chance to increase profit and to reduce costs.  Because, if you've been in business a while, you have a rich customer history to analyse.  (You can tell who your best customers are using a simple cost benefit matrix). 

So, why do owners not just target their most profitable customers (Here at BHH, we call them the 'A' and 'B' customers)?

Owners can also reduce costs by not doing business with the most difficult or marginal clients (or at least charge them more so increase profit for the same cost). 

There is another cost to not segmenting your customer base - the "opportunity cost" of serving everyone.  Those A and B customer represent the best prospects for up-seling; Also, they are the most receptive to new (profitable) services.  Not focussing on these clients can mean missing out on these other rewards.

So, is it time for you to look at your customer base more carefully and decide who you want to serve in the future?  Should you choose your customers, not just let them pick you? Now, there's a thought!