In most companies, the long tail of profit desert customers — small, low-profit customers often numbering in the tens of thousands — has surprisingly important latent profit opportunities. The key to success is clustering these customers into segments by profitability and development potential, then crafting an appropriate management plan for each segment.
There’s Still Profit Potential in Your Low-Profit Customers
They can amount to 50–80% of customers — and consume about 40–60% of a company’s costs.
November 09, 2021
Juan Moyano/Stocksy
Summary.
Profit desert customers — small, low-profit customers often numbering in the tens of thousands — are an important business segment in most companies. They often amount to about 50–80% of customers and consume about 40–60% of the company’s costs. In some companies, they’re assigned to territory reps as low-revenue “C” accounts, which distracts the reps from selling more lucrative business. In all companies, they create costly complexity in functions ranging from order-taking to fulfilment to after-sales service and returns because these customers are numerous and often inexperienced. The best way to manage your profit desert customers is to cluster them under a unified management structure — a profit desert customer team — rather than having them scattered in sales reps’ portfolios throughout the company. This team should be composed of specialized sales and marketing managers who are solely focused on this customer segment. The author presents three steps these managers should take to bring latent profits to the bottom line.