Of Barnacles and True Friends

Some of you know that I am an Adjunct Professor at Rensselaer's MBA program in Hartford, CT. This semester I'm teaching several sections of Marketing and Product Management. Last night we talked about the link between customer loyalty and customer profitability. While the conventional wisdom is that loyal customers cost less to serve, pay higher prices and spread positive word-of-mouth the evidence points in the other direction.

Our discussions focused on 4 distinct types of customers: Butterflies (customers that flit and and out, profitable but ethereal); True Friends (the kind of customers we all want to keep); Strangers (new, unproven, untested...don't invest anything in them until they prove themselves) and my favorite name, "BARNACLES." These are the customers who often consume more resources than they're worth, picking, demanding, low margin...we all have clients/customers like this.

In my business, I try to scrape off the barnacles as soon I as can. If you're in a volume based business, like my dear friend Tom Zotter at Allstar Supply, you might put up with them to keep your volume up. Higher volumes mean lower unit costs for all your customers.

Either way, the point is, spend some time identifying what profile fits each of your customers and develop a customer-management strategy appropriate to each group. Call me if you want to talk about it.

GMS