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Managing Your Customers

(August 2014) posted on Tue Aug 05, 2014

Can categorizing your customers into A, B, or C types work for your shop?

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By Marty McGhie

One of the most important, but challenging aspects of business is the management of your customers. We can all agree that your customers are indeed the lifeblood of your business, but sometimes we mismanage our customers to the point that they become very challenging to our businesses and, at worst, end up costing us money instead of earning us money.

One of the struggles you probably encounter regularly is the challenge of meeting competing customer demands. How often do you accept a job with agreed-upon delivery dates only to find problems that inevitably compress the production time to the point that you have to make difficult decisions on overtime, delayed, or missed shipments, etc.? If the deadline for one client competes with that of another, how do you choose between the two? Do you, at times, just find yourself deferring to the customer, or the sales rep, that makes the most noise? That’s not the best long-term strategy for managing customer demands.

One idea might be to categorize your customers into A, B, or C types based on sales volume and profits generated by your customer base. Care for your A list clients first and foremost, and prioritize them over B and C clients. Likewise, a B client would take priority over a C client when competing demands arise.

This can be a difficult strategy to implement because it’s difficult to consciously choose to take care of one customer’s needs over another’s. But that certainly beats the alternative, which is to plow forward with production, ignoring the inevitability of missed deadlines and ship dates, and hoping for the best. Frankly, the best way to execute this strategy is to make sure that everyone in the company, particularly your sales team, understands your strategy and how it ultimately serves everyone’s bottom line.

Negotiating prices with your customers is also an important part of your business. While quality and service are often more important to the customer than price, establishing a fair value for your products and services will always be crucial to your on-going customer relationships. How do you do that in today’s competitive marketplace?. By being careful not to charge so much that your customer creates a bid situation in which the lowest price wins every time. Yet, you also need to ensure that the jobs you are producing yield the necessary profits for your business. That’s the trick.