Profitability Comes from the Differences Between Your Customers
In the good old days, everyone was pretty much the same, or so it seemed. Most Americans drove either a Ford or a Chevy. We all watched ABC, CBS, or NBC. We ate cereal for breakfast, and sandwiches for lunch. On bread.
Today, nearly every market is fragmented. In the Rio Olympics, Comcast distributed 6,000 hours of content, because people now watch content through every device imaginable… and because everyone wants to watch something different.
In the good old days, it was profitable to treat every customer the same. Today that is a certain path to ruin. If you sell the same thing to every customer, then you are a commodity provider who competes solely on the basis of price. Your margins will be squeezed tighter and tighter until eventually a dumb competitor cuts their prices so low that you can’t make a profit at all.
Today, there is just one proven strategy to grow your business and protect your profit margins: treat every customer differently.
The only true competitive advantage is knowledge you have about each customer that your competitors lack.
“Knowledge” can mean many things, but basically it translates to the ability to treat each customer in the way they want to be treated. Here are some examples what you might remember about – and for – each of your customers:
- Their product specifications
- How – and when – they want you to contact them
- Their bank account or credit card numbers, so they can pay their bills automatically
- What supplies they want automatically shipped every month (or week)
This list can be nearly endless. What you remember depends on what business you are in and what type of customers you serve. For example, a bank serving consumers remembers all the merchants each customer pays through online banking. A retailer might remember all the clothes a customer has purchased, so they can recommend new items that would match the customer’s existing clothing.
Basically, your goal is to make loyalty convenient. The more information you remember for each customer, the easier you can make their life, and the easier you make it for them to be loyal to you.
You want your customer to think: we can’t switch vendors, because it would be too hard. For example, in the online banking example, a person who pays their bills online would have to re-enter every merchant if they swap their primary bank account.
But even though most markets have fragmented, many companies continue to do business as though every customer was the same. They don’t make loyalty convenient. They don’t actively look for the differences between customers, and then remember those differences.
Here’s the bottom line: your profitability depends on finding the differences between your customers. Until you do this, you will be slipping closer to an unprofitable commodity position.