While the very idea runs counter to just about every instinct in a business owner’s mind, the fact is that it is entirely possible to have too many customers, particularly if they are the wrong kind of customers. And not simply customers who are a bad fit for your products or services – those that don’t value the things your business is built to provide – but even good fit customers could be weighing you down.
Recently, Loyalty Research worked with a company that creates plastic packaging for specialty food items. They were a relatively new company, but still had very little competition. They also had a rapidly expanding customer base that was able to make direct purchases. However, their production levels and overall profitability were declining. Their employees were working longer hours and accruing more overtime. LRC was brought in to assess the interactions and product requests of their customers.
LRC, brought in to assess client interactions and product requests, gathered feedback from over 1,000 customers and was able to quickly identify the problem. Over half of their customers were extremely small, spending less than $50 per order. By comparison, larger clients were spending over $75,000 per order. There was nothing wrong with the smaller clients. They liked the product and were equally as loyal to the company as the larger clients. But there were simply too many of them. While equipped to help small-scale clients, the company did not realize how many they had and the resources they required. The company needed to focus on the larger, more profitable clients.
Based on LRC’s recommendations, the company made the difficult (yet ultimately correct) decision to establish minimum order thresholds, effectively reducing their total number of customers significantly. Within a matter of months, they saw their overall profitability increase, while lowering the hours required to achieve that profit.