Know the value of your customers

Geoffery Colvin has written a book Angel Customers and Demon Customers. He has some nice point of view on these kinds of customers:

In our experience across a wide range of industries, companies typically find that the best 20 percent of their customers account for 150 percent of total profits! The worst 20 percent typically lose money equal to 75 percent of profits, while the remaining 60 percent of customers account for the rest. Knowing which customers are angels and which are demons presents an enormous opportunity.

Once you know the true profitability of your customers, you can figure out the reasons behind the numbers. For your unprofitable customers, you'll have to face the reality that you're not offering them a compelling value proposition - a way of meeting their needs so well that they'll reward you with handsome profitability. You'll have to devise new, better, value propositions for them, which our experience shows you can probably do. As a result, you'll start to turn those unprofitable customers into profitable ones, which typically creates a substantial swing in the business's overall profitability.

In the end, you may find that a small percentage of customers just cannot be made profitable. By the time you've figured out who they are, you'll understand very well why they probably aren't worth keeping.”

Have you found yours?

Thro' Brand Autopsy

Home or work - Rules are the same!

Read an extremely good article in ET friday last. Written by Verne Harnish, he says:

What is the underlying handful of fundamentals that drive everything else that’s important in business? What is still fundamental today in building a successful firm that hasn’t changed for over a hundred years? Tom Meredith, former CFO of Dell Computer, and I were discussing how the fundamentals that create a great business are the same as those for parenting great kids.

Anyone with children will recognise the fundamentals as:

  • Have a handful of rules
  • Repeat yourself a lot
  • Act consistent with those rules (which is why you better have only a few rules)

Further, he also quotes from Rockefeller’s leadership and management principles:

Priorities - Does the organisation have objective Top five priorities for the year and the quarter (the month, if growing over 100% annually) and a clear Top one priority along with an appropriate theme? Does everyone in the organisation have their own handful of priorities that align with the company’s priorities?

Data - Does the organisation have sufficient data on a daily and weekly basis to provide insight into how the organisation is running and what the market is demanding? Does everyone in the organisation have at least one key daily or weekly metric driving his or her performance?

Rhythm - Does the organisation have an effective rhythm of daily, weekly, monthly, quarterly, and annual meetings to maintain alignment and drive accountability? Are the meetings well run and useful?

How to stay relevant when consumer habits change - Learning from libraries

Seattle times has a great article on how  some libraries have adapted to changing consumer lifestyles and technology innovations that have been happening around them. The web has literally changed the way information has become available and shared by consumers. Some libraries have therefore morphed to become

  • Community Hubs
  • A place for new experiences - study rooms, a place to meet & socialize, little eating area etc.
  • A place for multimedia experiences -  check emails, watch videos, DVDs & CD entertainment

The article reports:

Those who can't afford the Internet at home come to the Bellevue Library to use one of the 108 computers available. "In a society where we're worried about the digital divide, libraries can level the playing field," Eisenberg said. "There's a shift from academics to the library being a form of entertainment," said Barbra Barkus, who has worked at the Bellevue Library for more than 27 years.

There are some great lessons here for brands and marketers!