Understanding the Value of Your Best Customer
Who is your best customer?
It sounds like a simple question. But the answer isn't necessarily the customer who spends the most money with you.
Your biggest customer might also demand disproportionate amounts of time, require heavy discounting or buy work that isn't particularly profitable. Meanwhile, a smaller customer might buy regularly, be easier to serve, refer other good customers and be a much better fit for where you want the business to go.
So how should you decide who your best customers really are?
Who generates the most revenue?
Who is the most profitable?
Who has the greatest lifetime value?
Who buys more than one product or service from you?
Who is easiest for you to serve well?
Who enables you to do your best work?
Who stays with you longest?
Who recommends you to other good customers?
Revenue doesn’t tell you the full story
Don't fall into the trap of assuming your highest-spending customer is automatically your best.
Look at the cost of serving them. How much management time do they consume? What margins do you make? How frequently do they buy? Do they pay on time? Are they buying the work you actually want more of?
A £500,000 customer can look impressive on a sales report. But if they're expensive to service, constantly negotiating your margins down and consuming a disproportionate amount of the team's time, another customer worth half as much could be considerably more valuable to the business.
Why does this matter for growth?
If you're looking for growth, understanding your best customers gives you somewhere much more useful to start than simply saying “we need more leads.”
Look for the patterns. What do your most valuable customers have in common? Why did they choose you? What do they buy? Why do they stay? Where did they come from?
Once you understand that, you can make better decisions about who you want more of - and where sales and marketing should focus their effort.
Don't forget the customers you've already got
Understanding your best customers isn't only about finding more businesses like them.
There may be untapped growth sitting within the relationships you already have. Are they aware of everything you offer? Could you solve another problem for them? Are there sensible opportunities to cross-sell or upsell? Are you doing enough to retain them?
Before investing more money in acquisition, make sure you understand the value that's already in the business.
If you're looking for growth but aren't convinced that simply generating more leads is the answer, let's have a conversation.
