Identify Your Customers You are Better Off Losing: The 5-Step Method

Let me be clear: some customers are not good customers.

They damage our businesses.

You should consider losing them or changing your strategy or offer.

How do we recognise them?

Cash flow is the lifeblood of our business. If we don't have enough money coming in to cover all the money going out, we don't have a business.

Earnings must match costs. As long as earnings exceed costs, the business will continue to grow.

Earnings come from clients. A business either sells a service or a product. Does it have another revenue stream in terms of investments? Usually our earnings come from our clients.

Costs are what we spend to keep the business running and build the service or product(s).

Clients' money covers costs.

So, which clients are bad for our business?

The ones that don't contribute their fair share to cover the costs!

The concept is simple. With a little guidance, the application is straightforward.

I'm going to give you an overview of the best customer hunt method.

Then, in the following weeks, I'll go into more detail.

Step # 1: Identify Your Best Customers.

To attract more of your best customers, you need to understand who they are and what they have in common. It is crucial to identify what sets your best customers apart from the rest.

I'm sure you've seen business owners or solopreneurs struggling to keep the business off the floor.

They are doing a lot of work and getting very little in return.

They might be catering for their bad customers.

“The more you know about your customers, the more you can provide to them information that is increasingly useful, relevant, and persuasive.” – Jay Baer

Step # 2: Identify Your Target Customer Profile and Set Your Own Standards for Excellence.

It's possible that some of your customers aren't meeting your expectations.

Are they the worst?

There is a spectrum of quality here, and it's not just black and white.

Our customers range from "Very Bad" to "Slightly Bad", "Not Bad", "Good" and "Great".

Best Customer Meter with a possible definition. You can use your own definition.

We need to establish a value that indicates how much you have to earn from a customer to qualify them as a "not-bad customer."

For example, "not-bad customers" must pay at least 200 euros worth of product. Or 50 euros a month in service fees. We need a value like that.

A customer that buys your product once in a while, or just once, or stops at your audience offer is still a customer.

Is that a 'not-bad customer'?

It depends on how much you spend on that customer.

This step is focused on your costs for a reason.

Step # 3: Multiple Offers vs. One Customer Journey

If you have multiple offers, you will undoubtedly find that some customers are bad for one offer and good for another.

Knowing this will allow you to decide whether it's worth your time to try and switch their offer to one that will make them good customers.

If you only have one customer journey, skip ahead. This differentiation is not relevant for you.

If you have customers for an offer you work on for just one hour a week and customers for an offer you work on for the rest of the time, the minimum value to make them "not-bad customers" is going to be very different because your effort and costs are different for the different offers.

For example, let's say you have 2 offers: one costs 10 EUR and the other one 150 EUR each purchase. A customer that only pays 100 EUR is bad for the 150 EUR offer and great for the 10 EUR one.

To make this work, we need to focus on time. How much time do you spend on each offer? It will determine how much they cost.

Step # 4: You Need to Check the Time Frame you are Analysing.

We will be discussing year-long data for the time being. However, customers can have a longer lifespan. Or a shorter one.

If you can categorise all customers individually and assign a personal label to each, you can easily distinguish between groups.

And the analysis will only get more detailed.

The more detailed this analysis is, the more you'll understand what's going on in your company. However, this will also take more time.

Given our limited time and resources, we should aim to keep the analysis as comprehensive as possible without going overboard.

Are there any issues?

If you already know how to do each of these steps and never put them together, this issue will be useful to you.

If further guidance is needed, the following issues provide more detailed coverage of each step.

See you then!