How to Treat Your Major Customers
All companies have major customers – they are the life blood of your business. Major customers represent 20% or less of the customer base, but about 80% of your revenue (*see below). Some companies haven’t formally identified these treasured customers and that’s a mistake, since the health of all businesses depends on them.
Major customers have a higher retention rate; they are more loyal, less price sensitive, and buy more products, more often. Once you know who they are, how should your marketing strategy deal with them? One school of thought says, “Market to them like mad. Get them to buy more.” That might work, but, in most cases, it is probably a mistake. Big mistake! The better option is to work to retain them.
How did these customers become major customers, anyway? They reached that point as a result of your getting most or all of their decorating spending. They are “maxed out” on your embroidery and/or screenprinting. A good example of what we mean is when a large bank found that they couldn’t profitably market to their major customers. Those depositors maintaining high savings balances would shift to CDs or other savings instruments, but the overall amount of their balances wouldn’t change. An analysis showed that five percent of their customers provided 80% of their profits. Getting these five percent to put more savings in their bank would have been useless; they already had it. So what should you do with major customers? Work very hard to retain them.
Think up, invent and provide them with special services that you couldn’t afford to provide to all your other customers.
- Airlines provide first class travel upgrades and bonus miles to their frequent business flyers.
- Some companies create a “Diamond Club” or “Platinum Posse” and send their major customers a suitably framed membership award (I like this idea -- very affordable!).
- Banks provide them with a personal banker (Chase Bank's “Private Client”).
- UPS and FedEx park trucks at their loading docks.
- Nieman Marcus provides special gifts and benefits.
- Some companies send discontinued items free to major customers as a “thank you for your business.”
Whatever you can do, let them know that they are very important to you, and show it by special services and gifts. So if you haven’t developed a special program for your major customers, get busy. It may be the single most important customer relationship program in your company.
*The Pareto Principle (commonly known as the 80/20 rule) states that, for many events, roughly 80% of the effects come from 20% of the causes. Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto (instead of naming it for me, and I was so close!). It’s a common rule of thumb in business. For example:
80% of a company's profits come from 20% of its customers
80% of a company's complaints come from 20% of its customers
80% of a company's sales come from 20% of its products
80% of a company's sales are made by 20% of its sales staff
Hence, many businesses have easy access to dramatic improvements in profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or retraining the rest, as appropriate.
The bottom line is, take care to maintain your major customers and work to move some of the 80 percenters up into the 20 percent realm.