How to identify ‘good customers’

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In the private sector, good individuals are broadly defined as a mixture of the characteristics below. These aren’t all necessarily business traits either, personal traits can also be indicative of how reliable and profitable a company might be.

1. Good net value

They yield value to the supplier which is more than it costs the supplier to service them, taking into account all costs.

Consider the bank customer who keeps a reasonable current account balance, never going into overdraft without permission, and rarely going to the branch, preferring instead to use cash machines.Identify Good Customers

This customer is of higher net value than a customer with the same average balance who constantly moves into a small overdraft and uses branch services. Even though this customer would pay higher bank charges, these are unlikely to compensate for the extra administrative costs triggered by staff constantly checking to see whether the overdraft will be paid off. Although the bank might try to optimise charges to the latter to make the account profitable, it will not always succeed.

2. Moral (i.e. unfraudulent)

They stay on the right side of the law in all their dealings with the company.

This might seem common sense, but there are grey areas where you need to exercise your discretion. For instance, some companies do quite well out of meeting the needs of customers who in other respects are immoral, but stick to the law while interacting with the company e.g. casinos or betting shops used for money laundering.

3. Prudent

They live their lives within the resources available to them.

This is always a good indicator of how a customer will be to work with, however some companies make a very good living out of imprudent customers, even if it does necessitate charging usurious interest rates!

4. Punctual

They are (nearly) always on time.

This includes, for example, paying off bills on time and arriving at transport locations on time.

5. Responsive in a relevant way to communication

They respond to marketing communications that are relevant to them, but don’t respond to ones that are not.

When receiving relevant communication, a good customer is likely to lead these customers to evaluate seriously the possibility of buying the product or service. Responding to communications that aren’t relevant is known as the “schoolboy brochure” phenomenon at the Motor Show, but is experienced by many companies with strong brands; however the World-wide Web has proved to be a very cost-effective way of handling these.

One of the major problems faced by companies is to manage communications cost-effectively (whether or not they are solicited in the first place) when they have a low probability of leading to retention or development of revenue. Of course, if the communication is solicited, this does not necessarily imply poor targeting, as the customer may respond in other ways than anticipated by the company.

6. Responsive to other initiatives

They are willing to try new products.

7. Accurate and Honest

They are happy to give relevant and truthful information to the organisation and to update information previously given.

This means you can determine appropriate ‘treatment’ for the individual, while avoiding wasting resources offering inappropriate treatment. This also applies to complaints (see below).

8. “Justified” Complaints

They only complain when they truly have a grievance.

Not all complaints are unwelcome, and companies who complain shouldn’t be written off as a bad job. Constructive complaints can help you improve your company’s service, and actually in the long term reduce the number and likelihood of future complaints.

9. Brand Ambassador

They are prepared to recommend a product or service to other individuals if it is good.

It really goes without saying that having a customer who sings your praises to others is invaluable, whether that be online or in person. If you have come across examples of your customer writing testimonials complimenting other companies, this will of course be promising sign for you.

10. Stable or predictable

Their actions are unsurprising, timely and fit to type.

It might be less exciting this way, but it makes for a far less time consuming relationship between you and that customer because you don’t need to chase around trying to find what they need all of the time.

Republished with author's permission from original post.

Merlin Stone
Professor Merlin Stone is Research Director at The Customer Framework. He is a leading expert in customer management, including customer recruitment, retention and development. His work focuses on improving customer experience, satisfaction, loyalty and trust, and also customer research, data analysis, systems decisions and supplier management needed to support improved management of customers. He is well known for conference speaking and thought leadership research.

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