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8. HOW to Focus on Profitability. Which customers should you cultivate and grow? Leading companies pay attention to this and don’t sacrifice profit for growth. They can have both. Here's a Profitability Focus Checklist: 2. CLV (Customer Lifetime Value): Are they a long-term customer or part of the churn? What do you expect from them over their lifetime? Can you up sell or cross sell them? How easy will that be? 3. RFM (Recency, Frequency, Monetary): When did they buy last? How often do they buy? How large a customer are they? 4. Strategic: How open are they to new products? Are they likely to be interested in maintenance contracts? Do they fit with your strategy in terms of your product/service roadmap? 5. Criticality: How critical are you to their business? How critical are they to you? Are they a good fit for your brand, reputation? Will having them as a customer lead to more customers? Are they an anchor customer in a new segment or geography? 6. Satisfaction: Do they refer you? Do they advocate for your business? Or are they a hassle to deal with? Is it easy to please them? Do they stretch your resources to serve them? Any special administrative support? How appropriate is their use of customer service and technical support? 7. Purchase Mix: What mix of SKUs does the customer buy? Are they buying the most profitable products or services? How many high, medium or low profit SKUs do they buy? Do they require you to hold inventory? 8. Consistency: Do they purchase every week, every day or once in awhile? Are their order patterns consistent and/or predictable? How much call center time is required? What’s the lead time: “I need it today” versus “the regular schedule?” Do they require special packing and handling? Do they buy using acceptable levels of automation? How reasonable are their quality testing processes? If returns apply, what are they—1%, 20% or just what? 9. Payment History: When do they pay—today, this month, 120 days, or what? 10. Delivery: How hard is it to deliver to them? Are their locations easily served or not? Are they clustered with other customers or off the beaten track? Are their receiving hours reasonable? When your delivery people get there, what degree of special handling is required? We can help you approach profitability segmentation from many perspectives, at many levels of sophistication from Voice of the Customer research to our profitability alignment tools. Our profit matrix can help you focus on high-profit revenue and our strategy decision model can help you determine the strategy most likely to make money to steer your investments in the right direction. Just using these tools will improve your profit picture, whether you use them at a high-level or take them in-depth. |
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