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Fall 2003

Keeping Customers: Internal and External

What's it worth to keep your current customers? Many companies can answer that question in a general sense but not in a specific one. It's well documented that it costs far less to retain existing customers than to go out and get new ones. However, many companies haven't analyzed the data to know specifically which customers are their best ones and exactly how much those customers are worth. External customer worth can be measured in dollar value. So can internal customer worth. Any relationship with an internal customer that saves you and/or the customer time is actually saving money. Time is paid for internally as salaries, time can be converted to money by taking the loaded hourly salary (salary plus benefits) and multiplying it times the hours saved.

After determining the measure of customer worth, D.J. Sprague, President of Dunning Sprague Marking suggests segmenting your customers into the bottom 20%, middle 60% and top 20%. The bottom 20% are customers who are high maintenance. They take up time and resources while spending little on your products and services. If your company determines that the bottom 20% end up costing the company money or are break even, set them free to do business elsewhere. It may not be as easy to set internal customers free. If your department must work with them, attempt to improve the relationship by determining the root cause of their being a "high maintenance" customer and fix it. If the problem is not able to be resolved, then quarantine your staff from the negative effects. Remind your staff that it's only one customer and that the ninety-nine others are cooperative and appreciative people.

The middle 60% of your customers are an area for potential growth. What would it take to increase the amount of products or services used by the middle 60%? Would the effort it would take to increase purchases or use be profitable? If the answer is yes then direct people in the appropriate path for obtaining more sales or usage from these customers.

The top 20% are the companies that buy the most and require the least maintenance. Retaining these customers should be a core strategy for your company. Never let your top 20% down and never take them for granted. Internally the top 20% can be your champions; they are the people who find value in the services your department provides and are willing to carry the word to other departments. They do your bragging for you.

How do you keep your top 20% happy? Sprague suggests:

• Give them access to your decision makers
• Stay in touch with them. Inform them of new products and services before anyone else.
• Apologize if you mess up
• Ask for their feedback