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1-Minute Insight: Not all customers are profitable
In my opinion, the biggest mistake new entrepreneurs make is to chase every dollar. While it will seem counter-intuitive to leave money on the table, it is not. This is because not all customers are profitable.
I used to manage a full-service bridal boutique and I noticed very distinct customer behaviors. Those that chose our low-end packages were cost-conscious. As money was tight, they wanted value for money and were very demanding. On the opposite end of the spectrum were clients who chose our high-end packages. As they paid a premium, they rightly demanded the best service and were hence also demanding to serve. The best, and most profitable, were clients who chose our above-average priced packages. This group was not only the least demanding to serve, but they also had the ability to be upsold as they were not on a budget.
Pricing is one of the 4Ps in marketing, and marketers need to think ‘as a system’ and to also consider the cost of delivering the service. Once you study the data, you will quickly realize that not all customers are profitable and, you would be wise to price to select your customers.
