Do You Need To Fire Some Customers?
Do you have customers that feel like they are more problem than they are worth? Chances are they are in fact not worth keeping around.
We should all do a segmentation of our customers into A, B, C & D. When you do this, you will find that the 80/20 rule does apply – meaning that roughly 20% of your customers will make up about 80% of your profits. You will also find that your most needy customers are your least profitable customers.
So what should you do with your D customers? You should upgrade them or fire them. You can upgrade them by sending a letter and letting them know that you have repositioned your company and share with them your new expectations of your customers/clients (price increase, payment within 15 days, etc). You further explain that if they are not able to follow the new expectations, that you will be happy to refer them to another company.
You are probably thinking, wait a minute I can’t fire any customers because I need the revenue. Here is the thing. We have data that shows that even if customers leave due to a price increase you are better off overall for 2 reasons. First, your profit increases more than the loss from the few customers leaving. Second, you have increased capacity from not having to deal with these trouble customers to bring on more A customers.