Page 122 - Marketing the Basics 2nd

114 Marketing: the Basics
THE CUSTOMER PYRAMID
The customer pyramid model is a variation on ABC and has become popular in the last few years. This is an important topic and one that is getting increasing attention. It is one of the best ways of improving profits. The idea is a deceptively simple one: segment your customers based on profitability and then treat them differently. The underlying principle is one all too few companies put into action. That is, customers differ, dramatically, on their ability to deliver consistent profits to your bottom line.
Picture a pyramid with four tiers or segments (see Figure 6.1). The top tier are platinum customers, the next are gold, the third are iron customers and finally at the bottom, where they belong, lead customers. Actually, lead customers don’t belong at all in your customer pyramid. This is usually the first group to action and they are an ugly lot. Lead customers, are actually nice people, one-on- one, however we must get rid of them because they cost us money every time we deal with them. And you can’t make it up on volume! What we must do is clear: upgrade them to at least iron customers or fire them! Sounds like we have been watching too much Donald Trump television but in this case the saying fits.
The first strategy is to convert our lead into iron customers, that is customers who make a profit for us and have potential to become the much more lucrative gold and platinum customers in time. How do you do this? A popular method is to adopt a leaner business model to do business with them. For example, instead of using your most expensive marketing tool, your sales force, use
Platinum Gold
Iron
Lead figure 6.1 Customer pyramid model