If all customers were created equal and your time was free, you could serve everyone. Sell them every product and provide any service they want.
In this new economy, financing your customers through a credit line is as reckless as selling your products or services at a loss.
If you don’t understand which of your customers and their purchases are profitable and growing and which aren’t, how can you survive over time? And how long can you afford not to know?
Consider this. If your average customer profitability is 25% and your average customer grows by 10%, half are less profitable and growing less and the other half are more. What would you do if you knew which half were worse and which half were better?
Here are three steps to segment your customers, and prioritize your products and services to increase your profits and growth.
1. Create a simple 2 by 2 matrix with growth on one axis and profit on the other.
2. Divide your customers, products or services into high/low growth and high/low profits and place them into their respective quadrants A, B, C and D.
3. Decide what to do with each group of customers and what they buy as follows:
Segmenting your customers, products and services by their growth and profitability is not a luxury but a necessity, especially when credit is tight.
Do so now, cut your losses and grow your profits!