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Taking care of your top ten customers – and knowing who they are

Monday, 11 September 2006
By Print 21 Online Article

Identifying your top ten customers is the first step to putting effective customer loyalty programmes in place in order to keep them. Dave Bell, Quote & Print, looks at recent trends in customer loyalty and the different ways you can rate the importance of your customers

The results of a survey done in June and July of this year, by Printing Industries, as reported by Hagop Tchamkertenian in Print 21 magazine, made very interesting reading. Though the sample size was only 129 companies, the results cannot be ignored.

They show that 51 per cent of respondents reported clients were less loyal than five years ago. However I think the more interesting figures are that 44 per cent were as loyal and six per cent were even more loyal than five years ago. What is even more important is that those companies that have customer retention strategies in place reported as 73 per cent of respondents for maintaining and improving loyalty.

Loyal customers are the foundation of any business and they must be taken care of. But it is important to recognize that not all customers, loyal or otherwise, are equally valuable.

The importance of your top ten customers cannot be overstated, as shown in the report with 32 per cent of participating companies saying their top ten clients were responsible for 50 per cent plus of total company sales.

An important consideration is – how do you categorize the top ten customers? Is it purely by dollar value of sales or is it by the profit you make from those sales? While the ten highest $value customers may keep the presses turning over, they will not allow you to grow the business unless they are also profitable customers.

Profit margin is the key indicator – performing work that just covers costs, while it may produce an impressive revenue figure, is almost certainly a waste of time and effort. You may also be expending a large amount of resources servicing your high revenue but low profit customers, resources that could be more valuably used to enhance your customer retention strategies with more valuable clients.

A practical suggestion on how to identify the really valuable top ten customers is to use your management information system to generate both $value sales by customer and profit reports by customer for the first quarter this financial year. Those that are in the top ten of both reports are those for whom retention strategies are vital. These are the customers you must keep!

The same reporting should be done for the 2004/2005 financial year as well to reflect the full year picture.

While there are sure to be a few surprises in the reports, it must be remembered that those in the top 20 need to be looked at closely to ensure that there is a close client relationship – the most significant factor in retaining clients, according to those surveyed.

Obviously the strategies used to retain good customers will depend on the market you are in and what drives your customers. However an important first step is to identify those customers you really want to keep.

This article was brought to you by Quote & Print

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