ALL ARE NOT EQUAL

IDENTIFYING CUSTOMER CATEGORIES

Smart companies are the ones that don’t throw away their best response, service or product on customers who will never appreciate it.  The smart business owners are the ones who know how to focus their energy on their best customers.  They understand what sets apart the good, better and best.  Knowing that, these leaders then set about to design and provide different levels of service and product integrity around the differences.

Our last article identified the three categories of customers: relationship, choice and transaction. Relationship customers have the highest level of intensity for what you have to offer and they are loyal to you.  They look to you to be the industry expert, their personal consultant. Not necessarily the largest category by numbers, but certainly the most profitable to your bottom line.

Choice Customers

Choice customers, the second category, may be harder to recognize than the other two. They frequently purchase a lot and can be very solid customers.  The choice customer will come to you for product and they enjoy the benefits that come along with it, but don’t seek out the higher level of service and support as do relationship customers.  What is the best response to a choice customer? A choice customer will want a selection of items at different price points.  Provide your customer with a strong value package of vertical integration. Offer Package A: which is a base item at a fair price.  Package B: the same item but for perhaps $1000 more you include a value added item. Package C: the highest value package which is more expensive than A, but only a small increase in price from B. The choice customers need to have options and know how to compare the price against the package.  They will be concerned about service after the sale, as with the relationship customer, but they will not necessarily base their decision on that. They may or may not come to you for their next purchase – they do shop the competition. The key to moving a choice customer into a relationship customer is to focus on value not price.  Your approach to a choice customer might be, “Bill, I know you appreciate a good value for your investment.  You want to provide your family with the finest car and the highest rating in safety.  May I help define for you the benefits in purchasing Package C?  The small increment in cost is far outweighed by the value received in owning a car with a more powerful engine yet an award winning safety design, plus the luxury your deserve!” A choice customer likes just that, choice, and the flexibility that comes along with it.  But beware, the choice customers, if you are not skilled in capturing them, may easily float to the competition.

The Transaction Customer

The easiest category of customer to identify is the transaction customer.  This customer has the least amount of attachment to you and your product or service. Transaction customers are price driven and will shop, bargain and barter until they have driven down the price as far as they can. They do not want a relationship with you, just the product and no matter how great of service you offer to these people, you can never build value with them. The “big box” stores know exactly who their customers are, the transaction customers. They do a great job of segmenting their part of the market and they appeal directly to the “lowest price”.

Create a Category Benchmark

Once you have determined which of your customers are in what category, it is particularly important to identify the product and service package that compliments their needs as well. Many businesses I work with are now are moving their transaction customers to catalogs, either on CD-ROM or the Internet, or they service this customer by phone orders.  Relationship customers want a product and service package that is tailored to their high-level need. The airlines do a great job of identifying service levels with Platinum, gold and silver categories.  The hotel industry has segmented their market into luxury/first class, extended stay and midmarket limited service accommodations.  Your benchmark service must say to the relationship customer, “I want to be your industry specialist.  You can count on me to provide you with not only great product and knowledge, but outstanding service designed to meet your individual need and lifestyle.”  The most important thing to remember is that not all customers can be treated the same, nor do they really want to be.  Knowing how to segment your market and identify your customer categories will help you maintain your Maximum Value Perception and command the full price you deserve.

About the Author

Thomas Winninger is the founder of WINNINGER Visionscope a Minneapolis based Think Tank. He is author of the best selling books MarketQuake, Price Wars, Full Price and Sell Easy and his just published book BULLSEYE! – What Market Leaders are doing to consistently HIT the BULLSEYE! Thom is one of the most in-demand business speakers in the North America today. For more information about his programs please visit, BULLSEYE! How Market Leaders consistently hit The Mark