That is, get rid of your worst customers. Your worst customers are the ones who are price-sensitive, rather than value-conscious.
What’s the difference?
Price-sensitive customers buy based on who offers the lowest price for what they believe are comparable goods and services. They very often buy at the lowest price at the cost of quality, features, benefits, durability, longer-term value, and overall results.
For you, the problem with price-sensitive customers is that they tend to be disloyal when it comes to buying from you again.
They also tend to be the toughest to please and the most likely to be easily dissatisfied.
Value-conscious customers, on the other hand, buy based on trust, relationships, quality, service, outcomes, and the ultimate experience they get from doing business with you. Over the long-term, you establish an ongoing relationship with these customers in which you’re both invested. As a result, they are more likely to be fiercely loyal and supportive of the longer-term success of your business. Though their expectations remain appropriately high, they are more understanding, patient, and forgiving when things don’t go as well as intended.
What’s more, value-conscious consumers:
- Are more likely to become evangelists, telling anyone who will listen about how great your business is.
- Naturally generate qualified and quality referrals to your business.
- Respect your values and approach to doing business.
- Are people whom you usually enjoy working with.
- Sincerely appreciate you and what you do for them.
In short, value-conscious customers give you what I call “enhanced customer lifetime value.” They will outspend your other customers and contribute significantly to the stability and expandability of your business. They are more likely to buy more from you and more often than anyone else.
Here’s a real-life example of enhanced customer lifetime value from my work with a new coaching client:
Bob has run a small business bookkeeping service for the past ten years. He employs several staff members to serve a variety of small businesses, ranging from solopreneurs to multimillion-dollar enterprises. In one of our first conversations, Bob shared that he was struggling with growing his revenue stream. This in spite of a loyal client base, some of whom had been with him since the start of his business.
I inquired about the range of fees that Bob charges his clients and what he provides to them in the way of service. Bob said that some of his clients have made comments such as, “I don’t know what I’d do without you.”
Given the value that Bob’s bookkeeping service provides, it was readily apparent to me that he has been undercharging his clients. When I questioned him, Bob replied that for the past two to three years he has been meaning increase his fees, but just hadn’t felt comfortable following-through.
Why? He said that he still needed to add certain offerings to his business before he felt good about asking his clients for more.
But here’s the real problem: Deep down, Bob didn’t believe in his own worth and, therefore, didn’t have an appropriate appreciation of the value he provides.
After only our second coaching session, my coaching to Bob was this:
- Raise your fees.
- Write a letter to your clients to acknowledge your true gratitude and appreciation of them.
- Include a recap of all the new features you’ve added in recently and include reference to the value you provide them.
Include notice of pending fee increases and to expect a phone call from you to discuss the changes.
Naturally, Bob feared that he’d lose a lot of clients in the process. He was afraid of what his clients would think. But, with my guidance, he did exactly what I coached him to do.
- Bob increased his monthly cash flow by almost 15% after our second coaching call.
- After our third coaching call, he increased his monthly cash flow by approximately 25%–that is, recurring cash flow he can count on month after month without having to market to get new customers.
- In less than one month, he went from a negative cash flow situation (due to recent significant capital expenditures) to a significantly positive cash flow position.
- Rather than being trapped by his limiting fears, concerns, and beliefs, Bob elevated his appreciation of the value that he provides his clients and he upped his confidence (and his bottom line) by charging based on value.
And oh yeah, he did not lose a single client.
Compared to attracting and acquiring new customers, it’s far easier and less costly to retain value-conscious consumers. In this case, Bob has a stable of value-conscious clients. And he proved it.
To get rid of your worst customers, here’s what you need to do:
- Overcome your own fears and limiting beliefs.
- Clearly communicate the value you provide to your buyers.
- Identify the characteristics of your best value-conscious consumers and know who they are.
- Cultivate your relationships with these value-conscious clients and customers.
- Provide great value to them.
- Reinforce the value that they get from using your products and services by reminding them periodically.
- And keep adding to it—then bill ‘em fairly and appropriately for it.