Clients need to be treated fairly, not equally. And many should be shown out the door, even during the harsh COVID-19 economy.
That’s the contrarian opinion of Martin Jacobs, a senior leader in the technology industry with more than 25 years of experience working internationally for both family-owned businesses and Fortune 500 companies such as Avnet and Texas Instruments.
Because of COVID-19 and the worldwide fear of a prolonged recession, many are tempted to take any clients they can find. Jacobs advocates a client-centric approach that favors your most profitable customers.
“These historical, unprecedented times call for strategies you probably didn’t learn at business school,” said Jacobs, an alum of the Wharton School of Business. “Surviving means implementing actions that at first might appear counter-intuitive.”
According to Jacobs, here are three client-centric principles for you to not just survive the COVID economy, but thrive:
Principle 1. Know that giving excellent customer service to everyone might be ruining your business. “If you are a business that boasts, ‘We have great customer service! All of our customers love us,’ you’ll have a problem surviving this new world economy,” says Jacobs. “Great customer service to all of your customers can actually be the worst possible thing you do for your business and increase your chances of going bankrupt. This one-size-fits-all approach confuses customer service with customer-centricity. Customer-centricity is all about scaling your operations according to the value of a customer’s returns.”
Principle 2. Unless you are Amazon, limit small orders. “If 90% of your profit comes from your top clients, you dilute your profits and energy pursuing everybody else,” says Jacobs. “Trying to please everyone will decrease your productivity, burnout your sales staff, and jeopardize losing your largest clients. Your largest customers go where they get the best treatment. And every order you take from a small customer takes away resources from your top customers. Therefore, find a business model for your small customers that provides pure profits for you. There are plenty of companies out there eager to sell your products for a commission. The commission takes away from your profit margins but eliminates all other downsides.”
Principle 3. Give your top clients their own ringtone. “Create loyalty by giving your top clients VIP treatment,” says Jacobs. “At an executive retreat, after a few glasses of wine, a CEO of a Silicon Valley based company shared his struggles with his marriage. That his successful business put his family on the back burner and now he was going to lose his family. From my own mistakes, I shared how I learned how we can drive people most important to us away when we do not set clear priorities. A different ring-tone might just do the trick.”
The challenge many business leaders face today is a willingness to take any client on regardless of the profit margin. The leader may feel sorry for those clients who are also struggling with the recession. This can be a shortsighted approach.
“Tough times, just like the one we are all experiencing right now, show you who your most loyal partners are,” says Jacobs. “Pay proper attention to these relationships and the COVID economy can just be a bump in the road.”