Finding Treasures

The combination of the outside-in view i.e., net promoter score (NPS) with the inside-out view i.e., customer profitability (CP) provides a potent tool for uncovering the jewels in your customer base. Start by ranking your customers based on these two criteria, then categorize them in nine groups as shown in Figure 5.4. The 3 x 3 grid is the magical grid that provides a very unique customer profiling mechanism. Here, the net promoter score is plotted on the x-axis, whereas customer profitability is on the y-axis. The figure also shows some general strategies that you can apply to the customers in each grid. Let’s discuss them in detail:

Figure 5.3: Existing customers’ grouping based on customer profitability and net promoter score

1. Detractor—Unprofitable
   Guaranteed, the customer experience is the key to success in today’s connected world. There are customers, however, that will never be happy. These customers take a lot of your attention, money, and resources. They will cost you money and still give you a bad review. The customers in block 1 are those difficult customers. Instead of spending too many resources on these customers in an effort to win them over, it is wise to politely turn their business down.

2. Detractor—Breakeven
   These customers are not happy with your offerings, but you haven’t lost any money on them either. These customers are the source of a gold mine of information that is critical for improving your offerings, hence growing your business. Spend time on understanding their concerns, objections, and suggestions.

3. Detractor—Profitable
   This block represent unhappy customers from whom you have made ton of money. If you have customers in this block, it is a bad omen for your business. They stick around because they feel trapped but they won't suffer for long. Your competitors have a good chance of snatching their business from you, so these customers should be number-one on your priority list. Wow them, charm them, and make them feel special. The goal should be to move them to either block 6 i.e., the Passive—Profitable category or block 9 i.e., the Promoter—Profitable category. You don’t want to move down but across i.e., in an effort to woo them, you don’t want to lose money on them. Keep a close eye on all the initiatives that you run to please these customers.

4. Passive—Unprofitable
   In an effort to please customers, businesses offer many freebies to customers that may lower their profitability level. A large number of customers in this block mean many of your incentive programs are not effective. You may have been able to deter customers from spreading bad messages about your company but the tactic that you are using is costing you money. Look into adjusting your campaigns and processes.

   In this category, you may also find customers who buy only when you run a promotion or sale.

5. Passive – Breakeven

6. Passive Profitable
   The majority of your customers should be in blocks 5 and 6. These customers do not have any major complaint. They like your offerings and you have made decent money while serving them. These are your ideal clients. Your general business goal should be to have most of your customers in these blocks, so that you are profitable and can encourage these customers to become evangelic promoters by offering targeted loyalty programs such as rewards points.
    

7. Promoter – Unprofitable
   If your evangelic customers are costing you money, don’t write them off as a marketing expense. Rather, think of creative ways to make them profitable e.g., look at Google, which found a way to monetize its offerings by displaying advertisement on their search results, which eventually become their business model.

8. Promoter – Breakeven
   This is the group of customers that need new tools to spread the word. Think about empowering them with something special e.g., building a social networking community or engaging them in a conversation where they can invite their friends. Or offer them selective new products.

9. Promoter – Profitable
   These are the champions of your cause. Respect them, make them part of the insider group, and seek advice from them on new products, offerings, and changes in strategy. They have better know-how about your target markets than any research studies. Make them the part of your family.

Treasure hunting is not so difficult, is it? The magical 3 x 3 grid is a powerful tool to find treasure in your backyard. Apply it to your existing customer base and you will find gems. To unearth this treasure, however, you have to invest resources, money and people. The question is how much and where? This is where customer lifetime value comes into picture.

Related:

• Table of Content
• Red Queen Effect – An Introduction
  
• The Billionaire Code
  • Secret of World Class Companies
    
  • Impact of Using Secrets of World Class Companies
    
• Cracking the Code
  
  • Customer Experience
    
  • Customer Engagement Channels
    
  • From Multiple Channels to Integrated Multichannel Selling
    
  • Benefits of Integrated Multichannel Selling Models
    
  • Customer Relationship Lifecycle
  • Integrated Multichannel Selling Models
    
    • Reduced Costs
      
    • Improved margins
      
    • Broader market coverage
    • Rapid revenue growth
      
  • In Conclusion
    
• Implementation Plan
  • Renovation or Innovation?
    
  • Implementation Process
  • Baseline current go-to-market activities
    
  • Protect & Renew
    
    • You've Got Customers. Now What?
      
    • Net Promoter Score
      
    • Customer Profitability – A look from inside