Your customers are your ultimate boss and can make or break your business. You have to learn the magic of prioritizing your customers so you're spending your time where it matters the most. As your food and beverage business grows, it's crucial to understand that spending all your time trying to talk to all of your customers is not good practice. You need to segment your customers. There are the customers who are ordering the most and who have a very high chance of doing long-term business with you. And there are those who are in decline/at risk but could be worth some extra attention or intervention.
Understand the behavior of your customers:
Know your customer. This is a basic principle in any type of business. You won't be able to classify your customers effectively if you don't know their behavior. You need to know how they discover your products, to how they order from you and how they pay you.Here's a quick reference to assist you:
- Discovery: Remember that a customer's search may provide valuable insight into how they will shop for your products in the future.
- Ordering: A customer's ordering habits can indicate a lot about what type of client they are. If a cafe owner regularly orders more than 100 bags of organic coffee beans, they are likely to become one of your major spenders. On the other hand, if that retailer suddenly begins ordering 20% less, that could be a strong signal that he or she is trialing products from another supplier.
- Payment:It's crucial to pinpoint those customers who regularly don't pay on time and segment them from those who settle their invoices promptly so you know who needs to be called and be reminded. Not all customers are the same when it comes to paying the bills - some do pay on or before their due date, others don't.
Combining this behavior with what you already know about your customers starts to bring out some really interesting trends
Assessing your customers:
You can start to grade your customers based on their size of opportunity and the likelihood for growth. The size is, in essence, how big could a customer get, in terms of ordering from you. The likely for growth is how hard it will be for you to grow a particular customer.
We've made a simple guide for you to help you understand which customers are most profitable and which are most likely to grow over the long-term.
- Grade A customers – have potential to generate high profits and a lot of room for growth
- Grade B customers – could generate medium profits but are likely to be slow to grow
- Grade C customers– only generate low profits but may grow
- Grade D customers – will generate very low or no profit and aren't likely to make any profit at all
If you're starting out in the retail industry, it's important to make sure you grade your customers regularly and assess if a customer still fits the grade you've given them over time. Grade A customers should get the most attention - pre-emptive calls to check in and build relationships, then the rest. Most of your customers will likely fall in to grades B & C. Grade D customers should be approached with caution - too much time spent on them and you might actually be losing money.
With your customers classified into clear grades, it makes it much easier to work out who should be monitored and what trends to act on. For food and beverage suppliers, customer churn is a huge issue for the industry. Often a supplier won't know a customer isn't happy until it's too late. Looking at ordering data to notice trends in behavior can help you predict in advance who is at risk.