Choose the right customer

Choose the Right Customer: Not all customers are profitable

There is only one Wal-Mart. They cater to everyone with everything that even people who earn well shop there. Now, just because they are successful at this model, does not mean your business will be. However, most businesses try to be Wal-Mart, to their detriment. The mantra of, “Everyone needs my product! It will (fill in the blank)…” is so elusive, they actually believe it. I’m here to tell you that is not true and if you chase that rabbit, you will be highly disappointed. You want to choose the right customer; because not all customers are profitable.

Now this article may sound arrogant at times; it’s not meant to be. It may be offensive to some; it shouldn’t be. I am going to share some realities of business and marketing, but if you fall into one off the customer categories, please don’t look at it as a slight; rather, analyze the information for the nuggets of marketing and business wisdom it’s sharing. Okay, disclaimer aside, let’s take a deeper look.

Generally, I know there are exceptions to every rule and not every person fits neatly into a group or category; but generally there are two groups of people: those who look for the cheapest price, and those who want quality and make careful money decisions. The first group is more emotional; the latter is more practical. How you choose to market and position your brand will determine which you will attract.

Now keep in mind you may not be consciously positioning yourself for one group over the other, but how you choose to brand yourself (website, social-media presence, business cards and brochures, logo, content delivering your message, etc.) may be speaking to the demographic you DON’T want, rather than the one you do.

Marketing Value versus Price

If your product or service was created for the price conscious, then you position yourself for that group, intentionally. However, if you wish to market to a clientele that is more selective, considerate and practical, then you must market to speak to that demographic. Now why is this important? You see, each group thinks differently. What they want, their perspective on price and quality, customer service and what is reasonable service versus unrealistic expectations. Let’s look at the car selling example below.

The Car Selling Example

People who do not earn enough to buy a premium car ($50,000 and up) are more emotionally minded. Ever noticed that car commercials for that group are very fast, funny or sexual, loud, in your face and love to throw around, “We’ll pay of your trade, no matter how much you owe!” And guess what? Most people actually believe that! They don’t understand that anything you owe above the trade-in value of the car will be added to their new loan. So if they owe $5,000 more than they received in trade-in value for their existing car and bought an $18,000 car, they are financing $23,000. But, since marketers know how that demographic thinks and WHAT they pay attention to, they use gimmicks, humor, loud music, eye-popping colors and sex to attract the customer.

Guess what? The customers which one typically has the most hassle with and costs the company more money overall is the cost-conscience, inexpensive buyer. When a brand chooses to do business on price, they will ALWAYS have to deal with this; because someone else can underbid them and now the customer feels cheated.

Buying careConversely, the premium-car manufacturer’s commercials are more soothing. The announcer speaks slowly, in a lower tone and sounds more intelligent. They speak about the benefits and value of the car, the comfort and prestige the driver will enjoy. In short, they appeal to status and practicality. Why? They know that the majority of people who can afford a car of this price range are typically business people, probably more educated and are more adept at money management. Therefore, they stroke those sensibilities. Since many are either business owners or in high-level management; they understand what it takes to offer this kind of quality and service, and are more sympathetic and considerate.

Managing the Expectation

So what am I saying? How you choose to promote your business will determine how much of a profit you will make at the end of the customer lifecycle. You see, a customer has a lifecycle. It could be six months to five years or more; depending on what you sell, how you treat that customer and what upsell options you have for the future. If you sell a product based on price, where your markup was just enough to be competitive, by the time the lifecycle of your customer expires, they may have eaten that profit up and bled into your cost. How? Constantly expecting more for free; arguing for additional options and wasting your time trying to win; you giving in just to avoid the conflict; the business lost because you were tied up and could not address new customers or upsell old ones.

However, when you position your brand on value and quality, people understand they are getting more and it will deliver higher value; hence they are willing to pay extra. They understand they are buying the uniqueness, quality and experience you bring to the table. More importantly, they realize they are getting a better deal than the cheaper product or service, because it will save them time and hassle, run longer or present their business in a more professional manner. All this adds up to opportunity costs they won’t have to incur.

Manage expectationsTherefore, the user experience you offer through your branding and marketing will set the expectation. Done properly, it will attract the clientele you want and not the one you don’t; because they will assume you cost too much. And since you branded yourself well and the expectation is high, you have plenty of room to price your product or service and look like a hero.

Free versus a Fee

As you think of your marketing strategy and tactics, keep in mind that FREE is not always good. Many business owners think, “Use FREE as a hook. This will give me the opportunity to win them over and upsell them.” While you may for a small percentage, typically those who receive something for free don’t appreciate it. They don’t see the value and will hem and haw. Why? In their mind, if it’s free now, it will be free later. You will waste time chasing them. If you get them, they will typically say that free is good enough; because they had nothing before.

However, if you charge a fee, it weeds out those who just want to mooch and brings those who are looking for value. In their mind, “If I invest $X, I want to get a return on my money.” Therefore, they will be more responsive and open to how they can improve their return. For example, if you say something like, “… regularly $499, for a limited time only $99!” there is perceived value, they see a savings of 80% (which gives a sense of urgency), but requires a commitment.

I am a true believer that you get what you pay for. That cheap computer, tablet, service… you name it, will ALWAYS cost the buyer something. Whether it be the inability to accomplish what they expected, shoddy workmanship, slow performance or little to no return – there’s always a price to pay. However, some people are wired that way and that’s okay for them; but it may not be okay for your business.

So think your strategy through. Make sure you package your offering in the best and most professional way possible. Make sure the user experience screams QUALITY, PROFESSIONALISM, CUSTOMER CARE, THE BEST! It will not only give you peace of mind, it will pay dividends over the long run.

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Eddie Velez

CEO and Founder at Success by Design
Eddie Velez is a marketing professional, designer and author. He has contributed to many portals like "Media Connections," "The 5 Minute Business Mind" and others. He has also contributed the chapter on the Internet and Websites for "Secrets of Successful Inventing: Sixteen Experts Spill the Beans." Eddie writes on many topics and has been a ghost writer and editor for authors and consultants. If you want Eddie Velez to contribute to your business content, portal or blog, contact him to discuss your particular needs.
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2 Comments

  1. Gloria says:

    I’ve been mulling over this very concept. Thank you for a thought provoking piece.

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