Ever considered “The Difference” entry-market businesses sometimes create between two groups of customers?
While you think about that, here’s a little background.
On numerous occasions, I’ve urged you to add premium services to your product and services mix.
These premium services add higher profit margin services and attract more loyal customers. That doesn’t mean they are better people than the entry-level spenders. They’re usually higher loyalty customers because when price is a primary decision point for buyers, it’s natural that loyalty to the vendor suffers.
That’s also why I nag you not to compete solely/primarily on price. No one ever sent their kids to college, bought a boat or went on a dream vacation using the profits made competing with Walmart on price.
Another reason I’ve suggested this is that these “higher rung” products and services provide a bigger profit margin per transaction, making it easier to afford to serve entry-level and/or more price-sensitive customers whose profit-per-transaction is smaller.
SIDEBAR: This is yet another reason to know your numbers for each product, each service and each customer type/tier that you serve. If you want to hire someone new, you can figure out how many “whatevers” you need to sell (or how many upsells you need) in order to fund that position.
Mister Flip Flop?
Now wait a minute. I just talked about higher loyalty customers and bigger profit margins and then I justify them as making it easier to afford to do business with entry-level customers? Isn’t that a bit of a flip-flop?
Not really.
As you know, some entry-level customers will eventually climb your product/service ladder and transform themselves (perhaps with a little help) into the high-value, frequent buyer customers that I repeatedly suggest you court. Enough of them will help your business hit its break-even point a bit earlier each month.
You should know (back to that sidebar) how many of these entry-level customers become premium customers. That lets you predict future business more accurately. I suspect it’s obvious where that gets you.
One key to growing the premium-customer part of your business is doing a better job of identifying what’s different about the customers who make that step up from entry-level. Work hard to identify these differences so that you can offer those customers timely opportunities to become premium customers.
Finally, after all that, a difference – but not “The Difference”.
Fast, Cheap or Good
The most often seen characteristic of “The Difference” is about time. High-value customers tend to buy products that arrive on their schedule and use services that let them dictate the when. This typically comes at a premium price.
For example, when traveling from San Francisco to NYC, you can fly, take a bus or a train. If you fly, there’s a chance you’ll be late, but you’re more likely to be late on the train or bus. The premium/entry line has been smudged quite a bit in air travel, so much so that it often feels a lot like bus travel.
“The Difference” also appears in how customers are treated when products/services aren’t delivered in the time promised. It reminds me of the old programmer’s joke: “Fast, Cheap, Good – Choose any two.”
Entry level services tend to dictate the when to the customer, and if the when is late or otherwise fails to at least meet expectations, it’s common for them to apologize, do little or nothing to improve and move on to repeat the cycle.
Customers treated in this way get frustrated by the late, uncaring appearance of the services they use, but the price often has them.
Where “The Difference” crops up is how these vendors treat those folks: Like a “them”.
Shrink The Difference
Where you can intervene is simple: Stop treating everyone “in coach” (so to speak) as if they are at worst, criminals; and at best, a bother to you. You’ll move more to “First Class” and see the results in your bottom line.
Want to learn more about Mark or ask him to write about a business, operations or marketing problem? See Mark’s site or contact him via email at mriffey at flatheadbeacon.com.