Hi [[FirstName]],

January is flying by and will soon be gone. I hope your business is off to a great start and your marketing system is attracting lots of profitable customers for you.

Today’s newsletter is a little longer than usual because I want to tell you about a new pricing model where you will tell me what price you want to pay based on the value you receive. But first, let’s talk about your business.

Can Customers be “upgraded”?

I had an interesting discussion yesterday that I would like to share with you. The topic of discussion had to do with changing a customer rather than firing them. Let me start by giving you some background information.

If you happen to read my blog, you know I’ve posted a number of times (here, here, here, here, and, here) about firing customers that don’t match your ideal customer profile.

When evaluating your customer base, it is common to use some sort of rating system (A,B,C) to group customers according to their “idealness”. If customers in category C represent our non-ideal customers, those are the ones I’ve advocated firing.

The question came up, instead of firing them, why not convert them from a C to a B ? A valid question – one that appears to “make sense”, but I have my doubts as to whether it can (consistently) work. Here’s why.

I think the most common businesses try to move a customer from the C category to the B category is to sell them more stuff. While we all want to earn more revenue, most of the service based businesses consider a lot of other factors when defining their ideal customers. Will collecting more money from “bad” customers really make them “good”?

What makes a customer “non ideal”? I’ve found two general categories of reasons why a customer may not be ideal, 1) their behavior and attitudes make them non ideal or 2) there is a true mismatch between their needs of the customer and the solutions you provide.

Let’s start with #1. Do you have the time and energy to try to change the behavior and attitude of customers who probably don’t want to change?

 I’m not talking about firing a customer because of a misunderstanding. I’m all for setting crystal clear expectations and following up when those expectations are broken. But if a person doesn’t want to change, I don’t believe you can change them. Better to cut them loose and make room for an ideal customer.

If you categorized a customer as a C because he didn’t seem to value your time and is rude to your employees, do you really want to sell them more services?

When working with customers to help them identify their ideal customers, we always remind them that an ideal customer is not necessarily the one(s) who pays you the most money. Assuming you do excellent work, there is no reason for you to work for someone who does not value what you bring to the table.

Having a true mismatch between your customers needs and the solutions you provide happens more often than you may think. People change. Circumstances change. Many businesses, particularly when they are starting out, are hesitant to turn away business. We may have customers for whom we can do the work, but it’s not really the type of work that we love. It’s not the type of work that causes us to do our best work. In the long run, this is not a “win” for either you or your customer. You are better off helping your customer find another provider who can do a better job of serving them.

So while I’m sure there are situations where a "C” client can become a “B” client, be careful in thinking that obtaining more revenue from them is the answer.

Introducing the Val-You Invoice

I have long been a believer in the idea that it is only the customer who can determine the value of the solutions we provide. Because of this belief we are changing how we bill for our services by using something I am calling the Val-You invoice. What this means is that you, the customer, will determine the price of the solutions I deliver to you.

In many ways, this really isn’t that big of a change from what I do now. I’ve always offered a 100% money back guarantee. I’ve always tried to have a sales conversation, rather than a sales call, in order to jointly:

• determine the problem(s) that need addressing
• determine if that is a problem that I can help you fix
• determine if it is a big enough problem for you, the customer, to do something about
• determine a price that makes sense for the customer

We will still have these conversations. The main difference will be is that you will determine your final price. The only catch is I will ask you to tell me why you paid the price you did and how I can improve.

I don’t want to turn this newsletter into a commercial, so I’ll leave it there for today. If you have any questions about the Val-You invoice works, just give me a call.

Bill
913.962.9261

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