Low Value Customers: Children
of a Lesser God?
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:
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?
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 .
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