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Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

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The Importance of Categorising Your Customers

Written by Greg Millar on September 23rd, 2019.      0 comments

Always Be Ready to Adapt Your Business to Change

You probably heard the phrase the customer is always right, well maybe that's not quite right.

perform-710Perhaps it should be rephrased and what we should be thinking about here is, the RIGHT customer, is always right.

There's a subtle difference there; we think that difference is that not all customers are equal. Not all customers fit your business model, and yet, our observation is that very few businesses actually categorise their customers.

That's understandable when you start your business or you acquire a business. Sometimes there’s pressure to put bread on the table and so we end up taking any customer that's going: any customer with a chequebook who will pay your bills.

But, there comes a stage in any business where it's important to review where you are or what sort of customers you're dealing with and should they be still dealing with your business.

What's important is to analyse your customers:
  • What are we working with here?
  • Who are they?
  • Where do they live?
  • What size are they?
  • How long have they been dealing with your business?

Once you’ve done that sort of analysis, the next thing to do is to think about what the criteria is that makes a really good customer for your business – a relatively simple thing to do, if you think about what an ideal customer would look like. They could be things like:

  • How large is the customer?
  • How active are they?
  • Are they a once-a-year or a once-every-three-years customer?
  • Do they buy something from you every month?
  • What's that product usage like? Do they buy just one thing from you, or do they buy several things from you?
  • To what extent do they refer new customers to you? (That could be important to you)
  • How easy are they to deal with?
  • How easy are there to work with?
  • How profitable are they as a customer?

Not all these criteria may be equal, so you might want to weight those. Once you've gone through that process, what you're able to do is create a report which will essentially rank your customers by importance, and when you have that report you'll then be able to make better decisions on your customer base.

A lot of what we talked about is very process-driven and that's where we can help. We can help you with analysis, rankings and scoring to put a report together so that you get a really interesting view of what your customer base looks like, and how you can then serve each segment of that customer base.

We’d love to talk with you about this if you feel it's something that will be of interest to your business. Please get in touch with the Alliotts team in Auckland and let's schedule a time to talk on 09 520 9200.
 

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