All Customers Aren’t Good Customers

I had a conversation today with a friend who’s also an entrepreneur. He has a consumer-facing business. He told me about a difficult customer who has unrealistic expectations on a shoestring budget. I had this exact same situation many times in the early days of CCAW. We tried to work with customers who had tight budgets and priced our products aggressively. In the end, we accomplished our goal of attracting more customers. What I didn’t realize was that some of them weren’t a good fit for our business. The time and energy required to service these new customers skyrocketed. Many of them were unprofitable and impossible to please.

As CCAW grew and we had more resources, we developed a more sophisticated pricing strategy and implemented it in a dynamic pricing engine. The strategy was aimed at attracting customers who wanted a fair price but also wanted high-level customer service. These customers were OK with paying a little more for peace of mind. Over time, our data told us they were also more agreeable and easier to work with when unavoidable circumstances arose (e.g., bad weather). We ended up building a large profitable business by targeting this type of customer.  

When you’re starting out, you’re figuring out how to solve a problem in a way that people are willing to pay for. Once you do, it’s worth stepping back and thinking about whom you want as customers. You can’t be everything to everybody. All revenue isn’t good revenue. If you’re intentional about the customers you want to serve, you can steer clear of those who aren’t a good fit—who, frankly, are more trouble than they’re worth—and build customer loyalty.