Low Value Customers: Children of a Lesser God?
by N. Ramasubramani

Ever since the emergence of marketing as the driving force of businesses, the customer has ruled the markets. For close to two decades marketers across the globe poured billions of dollars wooing the customer who was becoming the central point of any business plan. Discussions in board rooms and august business schools focussed their energies on pleasing the customer so aptly captured in the simple phrase - "Customer is KING". And the road to the showrooms were lined with red carpets so that his majesty the customer could, if it pleased him, cast a benevolent eye on the endless offerings so enticingly decked up in the show windows.

For a while there, the customer did rule. But not for long. Because today's marketers have discovered to their dismay that those benevolent glances were becoming extremely few and, more importantly, the coffers of the kings were not really lined with gold. In other words, while the marketer was treating every customer like a king, the reality was that only a few of the kings could really afford all that the marketer could offer. And so was born the realisation that "All customers are not equal"

The marketer discovered that while it was definitely good manners to treat customers like royalty and pamper them with all the marketing dollars in their possession, there were a wide range of customers: from those with true blue blood to those who were mere pretenders. In other words there were a whole range of kings: there were kings, samrats, super kings, monarchs, earls, lords and some footmen too. Quite naturally then the attention turned to sifting the 'king with the wallet' from the freeloader. And thus was born the field of relationship management which ballooned into a multi billion dollar industry based on a simple premise: Identify your most valuable customer and give him the red carpet treatment. And a new king - the MVC was anointed.

No harm there, after all the purpose of business is to generate a profit for its stakeholders and therefore it made sense to spend your marketing dollars on your most valuable customers. But the issue that is giving many a marketer sleepless nights is what we seek to address in this piece. What do we do with the Low value Customer? He still likes your product or service and has probably built an emotional bond with it and will continue buying it perhaps in small numbers. Should the organisation sever its ties with him and tell him to go somewhere else? Should it draw itself upto its full height like the early day clubs and declare that any one without the lineage of a bulging wallet shall not deal with it?

The problem we are discussing is not a figment of the writer's imagination. Quite a few organisations - especially in developing countries - are discovering that a majority of the customers that they enrolled for their products and services are not generating the kind of revenues that the marketers had hoped for. And marketing consultants are telling them that more than 50% of their customers are 'profit destroyers'. So what do these marketers do?

The responses have been chaotic: from knee jerk reactions of sacking low value customers to dissuading them from doing business with the organisation. Devices range from placing the coffee counter far away from the tables to fines on bank accounts dropping below the required minimum balance. But there does not seem to be a concerted, well thought out approach to 'value manage' the low value customers, LVC, if you please.

It is definitely a good practice to pamper your MVC. But the tendency right now seems to swing to the extreme right and axe all those who are not in this elite class. Such a strategy is myopic and is bound to affect the health of any brand because it suffers from the following misconceptions:

  1. It tends to value customers based on their current value alone: It is possible that the customer today is not spending enough on your brand but a one-dimensional measurement based on cash value alone ignores the fact that customers grow up the ladder of affluence. What happens to a customer who is starting out his career today and is therefore not on your current MVC? When he starts enjoying the luxuries of life will he be kindly disposed towards a brand that told him to wait in the line?

  2. It ignores the circle of influence: A customer may not be spending enough on your brand but surely he has a family and perhaps a wide circle of friends too. And what if he is a retired pensioner with grown up children with those bulging wallets? Wouldn't he share his disillusionment with the brand with his family? And would the family want to deal with the brand any further?

  3. It turns a blind eye to emotional bonding: Let us assume that the customer does not have the spending power and neither does he have far reaching influence. In other words he cannot harm the brand in any way. But does that mean we should show him the door unceremoniously? What about those bonds of friendship that he has developed with the brand? What value is the goodwill he carries in his mind towards the brand?

  4. It is inviting the 'jilted lover' reaction: Customers today are used to being treated well despite their purchasing power or intent. And if after wooing them a brand becomes noticeably 'cool' to the relationship, it is inviting trouble. And trouble in the internet age spells big trouble. It is relatively easy for a discontented customer to mobilise public opinion using the power of the net. Look at the number of the 'bash-a-brand' web sites that are flourishing on the net.

I am sure there are many more arguments to support my submission: it is suicidal to manipulate your low value customers. Am I therefore recommending that you spend your precious marketing dollars on the so called profit destroyers? Far from that. Spend all that you want on your most valuable customers. I have no quarrel with that. But do not cold shoulder your low value customers because they do not have those deep pockets. The need of the hour as I said in the beginning is 'managing customers for value'. And how do we do that?

  1. Talk to your low value customers: Most customers do understand that you can't get everything. And they have no problem with some customers getting royal benefits. All that they object to is being treated like mud. If you can explain to them what you can offer them in return for their favouring your brand, it is likely that most of them will stay. Sure some of them will still leave, but that is okay with you. After all you have not sacked them. And in all probability they will leave with good feelings towards your bank or insurance company or whatever service you are offering.

  2. Develop a low value relationship bouquet: It is really surprising how many marketers mistake relationship building with high value goodies and gift vouchers. Building relationships does not need money. It needs time and the willingness on the part of an organisation to invest in relationships. And the customer is there because he values the relationship. It could be as simple as a greeting message once a year; or a personalised email which a decent mass mail package can do without any human intervention.

    I still remember my visit to a McDonalds counter on a particularly busy day. The girl at the counter took my order and passed it to her friend and ran away on an errand. After waiting for what I thought was a reasonable amount of time, I waved to her from across the room and asked for my order. She was profusely apologetic for making me wait and when my order came it was accompanied by a free scoop of ice cream with the attendant in tow. "I am sorry you had to wait sir, I hope you will give me a chance to make up with this free ice cream" she said. It cost McDonalds nothing but created a brand ambassador in me with such a small gesture. What is needed is the willingness to show that you care

  3. Incentivise self service and other low cost services: Sure this sounds like blasphemy. But it is the other side of charging the customer for value added services. If the incentives are even passably attractive the low value customer will voluntarily shift towards the low cost services, while your MVC will continue enjoying the red carpet. Don't forget the fact that any face saving device has an important role to play in human relationships.

  4. Build quality into your low value services: Make sure that you do not cut corners in developing the low value services. Be sure that the services that you are offering to these customers are adequate and allow the customer to transact with the brand in a pleasant way. The simplest test is this: Would you be happy transacting with the brand in those conditions? If you can answer that question honestly, you will have a workable solution in your hands.

  5. Make the partings painless: If your customers still want to leave, make the parting as easy and painless for the customer as you can. And this is one area where many organisations, especially in the financial services area lack. The moment a customer wants to sever the relationship he is dropped like a hot potato and has to run from pillar to post to complete the formalities. If at all you are serious about the health of your brand make sure those who are leaving the relationship, leave with good feelings.

All the above steps may not be adequate to ensure continued goodwill in your low value customers. And customers being customers, there will always be voices of dissent. But at least you would not have burnt the bridges with a potential high value customer. And more importantly you would not have created a 'brand terrorist'. Because that child of a lesser god can really play havoc with your brand.

N. Ramasubramani (Ram) is a practicing loyalty manager from India. He works for Surfgold, which is a pan Asian Loyalty management company with world class IT clients such as Hewlett Packard, Microsoft, Advanced Micro Devices, Seagate and many more. He has more than 20 years of experience in marketing, advertising, brand building, direct marketing and online brand building. Visit www.surfgold.com or telephone:91-11-26511042/91-11-26515227 Mobile:9810774676 .

Many more articles in Customer Service in The CEO Refresher Archives


Copyright 2004 by N. Ramasubramani. All rights reserved.

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