Should profitable customers be the top priority for our customer service efforts?

Digg This!     StumbleUpon     Del.icio.us

RELATED CONTENT Customer equity: Long-term and short-term How do outbound and inbound call centers build profitable customers? How can we get our agents to focus on building customer profitability? How can we leverage data from our predictive analytics software? What's the best way to manage unprofitable customers? Three ways to track customer complaints and feedback How to measure customer satisfaction in the call center Analyzing and influencing customer behavior to create customer value Tips for managing customer value in a weak economy How should a B2B company build customer value and customer trust? Should we cross-sell to customers during a welcome call? Customer loyalty and retention Tracking the online customer experience after a website redesign Performance measurement analyst role and responsibilities Managing customer conversations in the call center Tips for customer service and sales to build customer trust Using Web 2.0 technology to build customer loyalty Text analytics software, net promoter score helps JetBlue take off with customer service Relationship marketing and customer equity with Don Peppers Leveraging customer loyalty in a down economy Secrets to success in using technology to optimize your online customer experience Three ways to build customer trust as a car salesman Customer loyalty and retention Research Marketing management and strategy Xerox embarks on social media monitoring program Relationship marketing and customer equity with Don Peppers Marketers not seeing big budget cuts, survey says Marketers failing to measure customer feedback, communities Can a recession reshape MRM, marketing habits? Making real-time information a reality in the contact center The influencer marketing approach Marketers missing the boat on customer data Building a customer-centric culture Customer value and successful marketing: How are marketing trends changing?

RELATED GLOSSARY TERMS Terms from Whatis.com − the technology online dictionary churn rate  (SearchCRM.com) contact center  (SearchCRM.com) direct marketing  (SearchCRM.com) loyalty card program  (SearchCRM.com) loyalty punch card  (SearchCRM.com) marketing encyclopedia  (SearchCRM.com) one-to-one marketing  (SearchCRM.com) sales cycle  (SearchCRM.com) service assurance  (SearchCRM.com) transactional marketing  (SearchCRM.com)

RELATED RESOURCES 2020software.com, trial software downloads for accounting software, ERP software, CRM software and business software systems Search Bitpipe.com for the latest white papers and business webcasts Whatis.com, the online computer dictionary

That is a very loaded question. And the reason it is is because we have to think very carefully about how we define the most profitable customers. If we're thinking of those most profitable customers as the people that are the most profitable to us in this moment, then we might lose some real opportunities to build the value of the company by looking at a customer who may not be profitable today, but will almost certainly be valuable tomorrow. So we think it is important to understand not only who the most valuable customers are, but also who the most "growable" customers are. Who are the ones who will never be huge, but will be solid and loyal to us if we give them a chance?

And we need to know who the below-zero customers are, the customers who are actually costing us money, which really means that they are costing the best customers money. And when we don't get rid of them, we are really asking our best customers to subsidize them.

So when we look at whether or not we recommend focusing customer service only on the best customers, what we really need to ask is what the cost of that customer service is? If we're talking about Web banking, or a Web retail site, then it turns out it is really not more expensive to serve the least valuable customers than it is to service the most valuable customers, because the electronic cost is fairly low. On the other hand, if we're talking about special, high-touch kind of expensive things, then it probably makes the most sense to lavish our resources on the places where we are going to see the greatest return for our company and shareholders. In many cases that will mean those customers who are the most valuable to us today, who are keeping us in business, and those who --while they may not be today -- certainly could be tomorrow, if we can identify them and make sure we are treating them very well.

So that's how we create customer equity -- in every given day a customer is becoming more or less valuable to us, whether we know it or not or do anything about it or not. And our goal is to make sure that we do know about it, that we do understand it, and that every day we are increasing the opportunities for customers to become more valuable to us, to be more likely to recommend us to their friends, to come back and do more business with us in the future. So taking the customer who is of medium value and making him of a little more value is a worthwhile thing to do. Taking a customer who is very valuable and keeping him that way is likewise a very valuable thing to do. Doing what Sprint did and taking the bottom 1,000 customers of your 53 million and cutting them loose so they can go find "telecom nirvana" with the competitor is also a very valuable thing to do. It will provide more resources for the company to serve the most valuable customers the best.