Most small business owners do not give much thought to what types of customers they serve. They are happy to sell to anyone and everyone who walks into their business. This can be a mistake, and it can lead to either leaving money on the table or, even worse, not making money at all. When you take a careful look at your customers you are likely to find that some customers bring significant profit to your business, while others may not bring as much or even make you lose money on them. Why would you want to keep those later type of customers or at least treat both of them equally?
In an earlier post we advised that all small business owners must know their best customers. We also showed that you also need to keep your eyes open for “bad” customers who take significant effort and time without providing adequate return. To make best use of your resources and effort you have to pamper your best customers and let go of “bad” customers, if you must. When you fail to do so you will fail to get the best possible return from your business.
Imagine a scenario that unfolds at a hypothetical restaurant. A demanding customer is being served his food on busy Friday evening. This customer visits the restaurant occasionally and at every visit he finds something to complain about. Not only that, but he is always on the lookout for discounts and is in the hunt for ways to avoid paying the full price. This particular time he is arguing about how the food is not cooked well. He is taking up lot of time of the manager and waiters while there are customers waiting to be seated and served. And here is the kick!! Some of these waiting customers are loyal to the business and are willing to pay premium for the quality of food and customer service. While the manager is busy trying to handle the situation with the demanding customer, these loyal customers are getting upset. The business is losing out on both ends. Don’t you think the business might be better off letting go of the demanding customer and taking care of the loyal ones instead?
That is why customers attracted to Panera Bread are different from the ones that go to Arby’s. The former group appreciates the quality and ambience offered by Panera and is willing to pay for it. While those going to Arby’s are looking to get lunch at low price. Management at Panera Bread understands this differentiation and do not seek out Arby’s customers.
You need to go through the exercise of understanding your customers as well as your own business and determine what type of customers you want to attract. Everything you do should be driven by this decision. In the next post we will show how you can go about understanding and segmenting your customer base. Till then let us know your thoughts in the comments.
