How to Identify the Best Customers for your Business
What’s a business without its customers?
Any organization, from small start-ups to massive corporations have one thing in common- a universal mission to serve its customers. The differentiating factor between these organizations lies within the type of customers they choose to pursue, the “target market” and how they choose to serve them- be it through products or services. Arguably, customers can be viewed as the most valuable asset to any existing organization. After all, a large portion of the success of any organization does depend on customer loyalty and satisfaction. As highlighted in the article by Frank V. Cespedes et al., “How to Identify the Best Customers for your Business”, the principles of opportunity management in relationship to sales productivity is discussed.
Overall, customers can be classified into two types of categories: transactional buyers and relationship-based buyers. The shopping behaviour of customers within the transaction category can be identified as often unwilling to purchase a product/service whose value/quality go beyond what they are looking for at that specific point in time. In comparison, the shopping behaviour of customers within the relationship category can be identified as more willing to invest in larger purchases for a more unique, specialized product/service. They show more interest towards learning the quality/value of the product/service and its feasibility over time.
As with every opportunity, there comes a cost. The time and money designated to one group of customers means these resources are unfortunately not available to be invested into other groups of customers. In addition to this, poor opportunity management ultimately results in the risk of the organization sharpening specific processes and operations, which customers do not particularly value. For instance, if an organization decided to sell to its relationship-based customers, extra consideration needs to go into value-adding services such as post-sale customer support. On the other hand, if an organization targets transactional buyers, then a greater focus on minimizing costs must be implemented in order to offer the most convenient and inexpensive goods/services that appeal to this target market. Challenges begin to appear when sales approach a relationship-based customer using a transactional strategy. This is why it is vital to identify and target a group of core customers for your business operations to be focused upon, and continuously strive to exclusively meet their specific needs.
However, in some cases there are businesses that have successfully expanded to a new target market while maintaining their existing customer base. For instance, Netflix expanded their customer base through online subscriptions, while maintaining their existing customers through the continued availability of hard copy DVD subscriptions. Following this good example, if a corporation decides to expand into a new customer base, it should continue to invest in maintaining the existing customer base as a precautious measure against potential failure with new customers.
Gaining a better understanding of the ideal customer can lead to the discovery of the key activities in boosting sales productivity. As sales is directly proportionate to opportunity management, by understanding the core principles of opportunity management; sales productivity is guaranteed to increase consequently. Once top management begins to carefully identify and understand the behaviour of their core customers, both sales productivity and opportunity management will improve, ultimately increasing profitability.
