Shape Your Business logo
Follow Us:

Classifying your customers

Thursday, September 06, 2012   By Mike Reddy


Despite folklore that talks about the customer always being right, the fact is that all customers are not created equal. Some customers are more profitable than others while others hold the potential to be profitable.

Classifying your customers helps you take the right action for each individual customer, while increasing your profit.

Take the time to examine your customer base to identify those who provide most of your income as well as those who contribute much less.

Classify your customers into four categories: A, B, C and D customers.

An A customer is among your best. They are loyal to your services, pay on time, and buy from you regularly. They may buy or utilise a large range of your products or services, are pleasant, friendly and provide the promise of growth and referrals to your business.

These are the customers you should be continuously focusing on. Offer deluxe or luxury services to these customers to show appreciation and work toward nurturing profitable relationships.

B customers can be qualified as those who may be lacking in one or two of the above characteristics. Perhaps they do not always pay on time or their purchases are not as regular.

B customers have potential - the goal here is to convert B customers to A customers. Resources should be focusing on B customers to try and find ways to nurture them into your A group.

C customers spend less and display little potential. However, when compared to the efforts of attracting entirely new customers, C’s still have a part to play. This group can be very useful in uncovering weaknesses in your services and identifying areas of the business that can be improved.

The last group, the D group, is the ‘headache group’. These customers never pay on time, are price/discount focused and are not worth the time and energy spent keeping them happy.

The D list should be a short list. Consider cutting the customers that do nothing but tax your efforts.

Different customers have different needs. Targeting and nurturing these individual needs can help you make the most of your diverse customer list and increase your overall profits.

Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.