Saturday, September 20, 2014

Axiom 54: Know Your Customer

"Your most unhappy customers are your greatest source of learning." -Bill Gates

"Know what your customers want most and what your company does best. Focus on where those two meet." -Kevin Stirtz

If you are in an industry that involves selling goods or services then you must learn how to size up your customers needs quickly. Customers usually fall into one of four categories: Cost Driven, Quality Driven, Service Driven, or Unethically Driven. Once you know what category they fall into you can compare their needs to your strengths and weaknesses as a company. By doing this you should be able to predict if a customer will be worth your time and effort.

Cost Driven

Cost driven customers primarily want the cheapest price. These can usually be the most demanding customers because they often demand quality and superior service as well. However, at the end of the day they usually buy from the person with the cheapest price.

  • Larger cost driven customers can add sales volume and increase your purchasing power which you can use to increase your margins with other customers.
  • These customers can be easier to service if the product they are buying is a product you have an industry cost advantage on.
  • Little or no loyalty means that as soon as someone else comes along with a cheaper price you will have to drop your price or lose the business.
  • Smaller cost driven customers often do not carry the profit margins to make these customers profitable.
  • Company resources are often tied up quoting, re-quoting, and negotiating. Every single order can be a battle. 
  • Avoid making your product or service commoditized. Make comparing apples-to-apples impossible through product differentiation or through how the quote is presented to the customer.
  • Build rapport with the customer as much as possible to at least have a chance at the "last look" before the customer chooses a vendor to buy from.
  • Streamline your quoting / order fulfillment to minimize company resources.
  • Minimize product and service costs wherever possible to be able to offer lower pricing to the customer.

Quality Driven

Quality driven customers want to make sure that your product or service will fully take care or their need. These can be hard customers to acquire but also hard customers to lose as long as your product or service meets their need effectively. 

  • Quality driven customers will be repeat customers if you can effectively solve their problem with your product or service.
  • These customers are not as likely to defect to other suppliers to take a chance on something that might not be of the quality they need. 
  • These customers will usually not fight you on price as much if you assure them that your product or service will fill their need completely.
  • These customers can be difficult to attain unless your product or service has a reputation for the quality they are looking for. 
  • These customers can be very picky and require more customer support or industry experts to manage their business.
  • Make sure your product or service will meet your customer's expectations or you will regret it later.
  • Streamline the availability of information, documentation, and product differentiation to the customers.
  Service Driven

Service driven customers can be your best customers, or your worst customers. This all depends on if their expectations line up with your company's strengths.

  • If you provide the service level that a customer needs and expects they are likely to be a loyal repeat customer.
  • Service driven customers are less likely to fight you on price and quality as long as you provide them with the service that makes their life easier.
  • These customers often refer other people to you if they are happy with your service.
  • These customers can be a huge drain on your company's resources if the service they demand is too far out-of-line with your company's capabilities.
  • These customers can sometimes require more staff and infrastructure to effectively service.
  • Don't go too far outside of your company's capabilities to service an account.
  • Make sure your customer understands what level of service you provide.
Unethically Driven

 There are still customers out there that want special "off-the-books" treatment. They don't necessarily care about cost, service, or quality. They just want a kickback. Nothing good can come about when sales are made by paying people off with money, trips, and gifts. Save yourself some heartache and your reputation by throwing this kind of customer account in the trash.


"Wait, my customer demands the best cost, quality, and service!"... On the surface many customers appear to demand a combination of some or all of the above categories. It is your job to dig deeper and ask enough questions to find out which category they value most - because inevitably they always do value one the most (And this could change depending on the customer's current project, need, or situation). Once you know that you can determine how much of your resources, if any, to devote to gaining their business.