HERDING GAZELLES | Karl Stark and Bill Stewart

Who Are Your A-list Customers?

Which customers should you be rolling out the red carpet for? Follow these three steps to identify the customers and prospects worth nurturing.

 

Attention this time of year turns to the Golden Globes, Oscars, and A-list celebrities.  It got us thinking about our own A-list customers–the companies we would love to have as large and active clients.

Each business has, or should have, an A list of its most valuable customers and prospects, but also a B, C, and D list. But too often, companies, especially growing companies, lack focus and cast a wide net to attract new customers. They end up spending valuable time and resources on C- and D-list prospects and miss opportunities to cement long-term relationships with their A-list customers, who not only bring valuable business but also provide important endorsements to their friends and business colleagues.

It’s worth spending time as a management team to develop your own A list. We recently did just that, using a simple, three-step process that has given our team renewed focus on the customers that will drive our business in the long term.

1.  Define the key drivers of long-term customer value.

What makes a customer more or less valuable to your business? Is it their size, their ability to spend, or their past behavior or relationship with your company? Are there specific demographics that link to customer value? In our business, where we work with management teams to make growth companies more valuable, we created a “mindset” criterion as one of the characteristics that make a customer valuable. Define the three to five drivers of value for your business.

2.  Create a comprehensive list of customers and prospects.

While most companies try to maintain a robust customer pipeline, we find that many don’t proactively develop a “long list.” Instead, they create a partial list that is mostly reactive to customer or prospect inquiries. If you are broader in developing your long list, you’ll be better positioned to identify the most valuable customers and prospects in your market.

3.  Develop a customer value scorecard.

Rank every customer on the long list across each of the value drivers you identified in Step 1. Keep it simple: a 0-3 scale will work for most businesses. For our “mindset” ranking, we gave management teams that were open to innovative, strategic and fact-based thinking a three (most attractive), while those that made snap, erratic judgments were given a zero. Take the average of the scores across your criteria to develop a “value score” for each customer.

The goal is to develop four to five branches of customers: A-list (highest average score), B-list, and so on. Precise scores are not as important as knowing which customers are more or less valuable than others. Shoot for an equal number of customers in each bucket, although you may find there are natural “breaks” of customers that are clearly above or below the adjoining groups.

By investing the majority of time and resources to your newly defined A-list clients and prospects, you’re likely to have more success developing valuable, long-term relationships–relationships that should pay off for years to come.

Have you developed your A-list?  Share your experiences and questions with us at karlandbill@avondalestrategicpartners.com.

Karl Stark and Bill Stewart are Managing Directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself, and is ranked No. 95 on the 2011 Inc. 500 list. @karlstark