Customer selection is one of those areas that many entrepreneurs dream about, “Wouldn’t it be nice if we could pick the best customers…” Then they go on taking whatever customers they can get.
Yet this is an area that has a large impact on how a business grows. If you want a business that serves your goals and commitments in life, then you may want to handle your customer selection issues right from the start.
The biggest threat to entrepreneurs is time. There’s too much to do, and not enough time to get it all done. Customer selection plays a very large role in how effectively your time is spent as you go about the business of working on and growing your business.
Poor customer selection doesn’t just waste your time from dealing with a difficult customer. One of the most powerful methods of gaining new customers is through referrals. Given that you always need a relationship sufficient to do commerce, referrals help to speed up the process of relationship development. When you are introduced to a new potential customer from an existing one, you borrow the relationship that your existing customer shares with this new person, until you can develop your own relationship with that new person. You start with an advantage!
There are over 6 billion people in the world. There are so many thousands or million people in your market area. You don’t need all of them to be your customers. You don’t even need most of them. You only need a few. How many customers (by our expanded definition) do you need in the next twelve months to be happy with your progress? Write it down…
So why not pick who you want to deal with (the people who give you energy and help you grow your business) and pass on the people who drain your energy without adding to the business?
What’s important about customer selection? People of a type or group will refer similar people. People will refer other people just like them, more often than not. If you are dealing with a person that is well funded to afford the most effective solution you can propose and appreciates the work you do, she will probably refer other people just like her.
Similarly, if you are dealing with a “P.I.T.A.” (a highly technical term, meaning “pain in the assets”)… this person will likely refer people just like him. If you build your business through word of mouth, not only do you waste time dealing with the wrong customers, but you waste even more time dealing with all the similar referrals you get.
Have you ever been in a situation where someone approaches you and tries to cajole you into giving such a big discount that you make little or no money on the transaction? The attempt usually includes some element like this: “I know a lot of people. If you give me this deal, I will recommend you to everyone I know. And honest, I won’t tell anybody about the pricing you gave me. It will be our little secret (nudge nudge wink wink). Just consider it as a marketing expense for all the business I will be sending you.”
Those of you who have gone for this ruse in the past have probably also experienced the other side of this situation. That is, the referred party comes in, quoting the discounted price and demands to be given your product for the same price.
Is this surprising? Not at all. Who does this person know better and trust better, you or their friend?
By spending time identifying who you want to do business with and who you don’t, you will save a great deal of time, which in turn can be redirected in serving your best customers better.
The first step in customer selection is to decide who your desired customer is. List all the criteria you have for the customers that you enjoy dealing with, and who help you grow your business profitably. Then list the factors present when you have a customer you really don’t want.
You cannot select the best customers unless you know who they are.
After these steps, you will then notice that there are a number of customers who fall into the “gray zone”. They may be difficult, but they give you a great deal of money, so it’s hard to say no to them.
Or it is a customer who might only do small volumes, but you still like serving them. That’s ok. You get to decide who you want to deal with. In each business, there needs to be judgment calls made as to what the tolerances will be. Where do you draw the line? Only you can tell, but as your business grows, don’t be afraid of making the parameters tighter and tighter, leaving you more time to serve your best customers better.
One method of enhancing your customer selection methods is to identify the roadblocks to sticking to the customers you want. What stops you from saying no to doing business with a “P.I.T.A.”? List the roadblocks and do not stop until you have them all.
Then for each roadblock, identify three strategies that you might use to overcome this obstacle. You will be amazed at how creative you can get once you clearly define an obstacle for your mind to work on.
The single biggest screening method we use at Kaizen Consulting is called the “Dinner Table Test”. If we have any ethical or moral issues with someone (or we just think they are a jerk) such that we would not invite them to our dinner table with family present, then we don’t invite them to the boardroom table either.
In our business, we spend so much time with our clients, assisting them to grow their businesses, that it is important that we feel comfortable with them, and that they feel comfortable with us. We never want a situation where we don’t want to take the call of a client. That doesn’t serve us, and it doesn’t serve the client.
These parameters may be quite different for you in your business, especially if you deal with a product rather than a service. Whatever the criteria are, by getting clear on your desired customers and saying no to those who waste your time, you will free up you time to make your business stronger.