We’ve all had that crazy customer who called in the middle of the night with a ridiculous question. The one who demanded a discount for an already free trial service. Who wanted to use the product for something borderline – or blatantly! – illegal.
Would it surprise you that these clients aren’t just annoying – they’re costing you money?
Here’s an example…
You’ve got two meetings today. One is with Amazing Angela, a longtime customer who pays on time, rarely calls with questions or complaints, and is generally a pleasure to work with. The other is with Needy Natalie, a new customer who has already called you four times this week with her concerns. Her heart seems to be in the right place, but she’s driving you crazy.
Not only are you more excited for your meeting with Amazing Angela, your end-of-year numbers show that she’s one of your highest paying clients.
It’s true: all customers are not created equal.
9 times out of 10, you’ll find that your most profitable client – your “Preferred Customer” – is also your most low maintenance. Your high maintenance “Pathological Customers” tend to be on the lower end of the profit spectrum.
Increasing your percentage of Preferred Customers can do a lot for you:
- Free up your time, giving you the opportunity to do better work for all of your clients (not just the ones who are draining your resources) and pursue your passions
- Increase your overall customer satisfaction
- Help you retain your highest-paying clients
- Lead to more referrals
- And of course, make you more money.
Let’s get pathological.
Remember our Pathological Customer, Needy Natalie? There’s a reason she was calling you with issues multiple times a day, making it difficult for you to get work done. Let’s get some psychological insight into what drives her.
Natalie cares more about getting a free product or low price point than about quality or long-term benefits. She’s all about the bottom line and will do whatever it takes to get more perceived bang for her buck.
Natalie doesn’t have enough business experience or education to get the most out of your product. Despite that, she tends to think she “knows better,” often skipping valuable sections of information and finding herself in the dark.
Running a two-person company, Natalie has too many plates spinning in the air and not enough help keeping them going. She’s unsupported – lacking the time, staff, and resources to help her keep up.
Demanding – of YOU.
Because of this, it’s no surprise that Natalie has a lot of needs. She wants more service, more time, and more results. She expects you to hand-hold and solve problems, fast – even though she’s not paying for that level of support.
She’s unaware that her needs are overtaxing you. She doesn’t realize that when she makes 10 customer service phone calls per month that each require 45 minutes from your team, she’s costing you more than she’s paying you.
Overall, Natalie’s situation makes her an undesirable client for you. It’s time to replace her, with…
Your dream customer!
Remember Amazing Angela, your easily manageable and profitable client? How exactly did she get to be so amazing? Everyone is different, but common factors unite all your Preferred Customers. They tend to be:
Angela cares more about getting a high quality experience and long-term benefits than a low initial price point. She sees your services as an investment, not a quick, cheap fix.
Her high operating budget gives her flexibility when choosing products, tools, and services. What’s $100 for your information product when her company is pulling in $100,000 a month?
Angela’s educated, experienced, and has a strong business acumen. She knows that to get the most of her investment, she should do as you, the expert, advise.
As part of a large team, Angela can have her questions answered by her immediate staff before going to you. She wouldn’t think of calling for help in the middle of the night, and rarely communicates with you unless it’s urgent and important.
Trust and awareness
Angela understands how to work with you. She treats you as a fellow professional with a lot of knowledge to offer, and always respects your time.
The #1 difference between Pathological and Preferred Customers?
Needy Natalie and Amazing Angela are clear opposites. But there’s one main difference that is the foundation of how they operate:
Their perception of YOUR value.
Preferred Customers perceive your value as high.
Pathological Customers perceive your value as low.
It’s as simple as that.
It follows, then, that the key to getting more Preferred Customers and cutting back on Pathological Customers is to increase your perceived value.
8 ways to increase your perceived value
1. Increase your pricing
Consider a blanket increase across all of your product offerings that broadcasts: “This product has great value.” Your Preferred Customers will pay – and you may even double your average revenue per customer.
2. Upgrade your product
Elevate what you offer, and you’ll attract better clients. The high-end analytics service KISSmetrics puts it best: “if what you put out is low grade, what you get back will be low grade too. If your products are seen as cheap they will attract the wrong kind of client.”
3. Upgrade your perceived value
In 1983, economist Richard Thaler proved that most of us would be willing to pay $2.65 for a cold beer brought to us on the beach from a fancy resort, versus $1.50 for an identical beer brought from a run-down grocery store. (Keep in mind, these are 1983 prices!) The product’s identical, but the perception is different. Update your presentation and marketing to achieve the same effect.
4. Tier your pricing
Offer a variety of higher pricing options with products that will speak to Preferred Customers’ needs. Read “Why Tiered Pricing Is the ONLY Way to Price Your Product” for creative ways to tier your pricing (and how to do it).
5. Test your pricing
The only way to find what your clients are willing to pay is to mine the data yourself. Test various tiers and varying price points, and you might find your most costly products are garnering you quality customers.
6. Vet your prospects
It may not be possible to sit face-to-face with every prospect before deciding to take them on, but there are ways to weed out the troublemakers. As designer and entrepreneur Sacha Greif explains: “Amazon’s EC2 hosting offering is one of the cheapest around, but the amount of technical knowledge required to use it ensures that no dummy will inadvertently sign up.”
7. “Fire” your bottom 20%
Make room for Preferred Customers with some simple house cleaning. Tim Ferriss of The 4-Hour Workweek suggests cutting ties with the 20% of your clients who waste your time causing trouble – especially since they tend to compose 80% of your company’s complaints. Beyond time, “the bottom 20% of customers typically generate losses equalling more than 100% of profits.”
8. Convert ‘em!
The savviest and most optimistic of businesspeople may be able to move their clients across the spectrum from Pathological to Preferred. It’s all about clear information (“What exactly is the product you have purchased?”), expectations (“What will you get and not get from this product?”), and consistent positive reinforcement (“Remember what we talked about?”).
Focus your energy on finding higher caliber customers, and you’ll have a roster of Amazing Angelas in no time.
**Summit Evergreen can help you get more Preferred Customers with features that increase your perceived value. Click here for more information.**