Should You Treat All Customers the Same?
In this column, I pose a simple question: Should you treat all of your customers the same?
Before you answer, let me tell you a little story. It seems a thriving (non-convenience store) business had 4,000 customers. At the same time, the owner knew the business was not performing at its optimum. After evaluating the business herself, the owner called in a consultant, who asked to see the customer list, as well as the list of sales.
After completing some rather simple analyses on this data, the consultant approached the business owner with the results. His analysis reflected that of the 4,000 customers, only 200 of them truly kept the business thriving. The remaining 3,800 customers supported the business at a bare minimum.
The business owner did something drastic -- she sold her list of 3,800 customers to one of her competitors and then focused on cultivating a much deeper relationship with her 200 remaining heavy-user customers. As a result, the business thrived and grew by a substantial amount.
This situation is not that different from your c-store business. Most businesses have four levels of customers in terms of the sales they generate. Specifically, 80 percent of your customers do only a little business with you. Another 15 percent do some business with you. Four percent do a lot of business with you, and the top 1 percent does the most. These last two groups bring in the lion’s share of the sales and profits to your business.
Now, I am not suggesting that you focus on the top 1 percent of your customers and "fire" the rest. What worked for the business owner in that other industry may not work out as well for your convenience store.
However, in my c-store, I had a handful of customers who spent more than $25,000 per year in my store (that’s inside sales, as it is hard to track what customers spend at the pump unless you dig through all of your credit card receipts). I worked to cater to those $25,000-per-year customers, going so far as to point out to my employees the customers who spent enough money in the store to basically pay their wages for the year, and then some. This resulted in generating a substantial amount of business with the customers who were already bringing in quite a bit of my net margin dollars.
Getting back to the other business owner I mentioned, she found that if she spent the same amount of money marketing to all of her customers, she still would have the same customers, as well as the same 200 customers that made the business thrive. By "firing" the customers who didn’t give her much business anyway, she could concentrate her marketing dollars on the 200 customers spending "the big bucks" with her business.
It was the same way in my c-store. When I spent more time and energy wooing my $25,000-per-year customers and less time marketing to the customers who spent only a couple of hundred dollars at my store on an annual basis, my sales increased substantially. If, on the other hand, I would have marketed to my $25,000-a-year customers in the exact same way I marketed to my $200-per-year customers, my sales could not have grown very much at all.
Trying to convince people to spend more money with you when they have been reluctant to do so is simply an exercise in frustration. However, working to convince customers who already spend tens of thousands with you on an annual basis to spend another $500 or $750 is easy, as these customers are already endeared to you.
So, would you answer the question at the beginning of this article the same way you would now?
Ted Leithart is the founder and president of The Leithart Group LLC and creator of C-store Marketing Systems. The Leithart Group is a marketing and business-building resource provider for independent convenience stores. Leithart's marketing expertise has been utilized to build and enhance more than 500 small businesses. He can be reached at [email protected], and more of his marketing insights can be found at www.CStoreMarketingSystems.com.
Editor's Note: The opinions expressed in this article are the author's and do not necessarily reflect the views of Convenience Store News for the Single Store Owner.