The Client Value Pyramid

What I call the ‘Client Value Pyramid’ is a useful way of categorising clients to efficiently focus your marketing and business growth effort. This framework has been taught as a staple of marketing strategy and can be used across a range of different marketing contexts. It is well worth having in the back of your mind when assessing which of your existing clients to approach to grow their contribution to your revenue.

Maintain clients are the top 20% of your client base in terms of their contribution to overall revenue, sometimes providing up to as much as 50% of your business’ overall profit. These high yield clients are typically loyal customers of your business who have delivered consistent revenue over a number of years, are clients with ongoing contracts or are clients that have demands that match your unique capabilities. The aim for these clients is to use relationship marketing to maintain their position in the client portfolio, and keep the revenue they provide feeding into your business. It may be unrealistic or inefficient for you to pursue these clients to push for more revenue via increased expenditure on your services without the risk of compromising your existing relationship. Instead, it is a much smarter strategy to be highly active in sustaining relationships to develop long-term value. For example, this can be achieved by offering exclusive access to extra augmented service offerings.

The second category is growth clients who are the bulk of your client base; the middle 60% in terms of the revenue they provide to your business. These ‘growth’ clients are so called because they should be the focus of your marketing effort to grow their revenue potential for your business. Ideally, 5%-10% of your ‘growth’ clients should progress into becoming ‘maintain’ clients each year. This is a good measure as to the effectiveness of your execution of marketing strategies to deepen your relationship with these clients, with the view to generate an increased revenue contribution.

The final group of minimise clients are the bottom 20% of customers that may actually drain more value than they provide in terms of revenue. Often this means that there is significant investment into servicing the client and maintaining the relationship in return for only a minimal contribution to profit. Essentially, clients that fit into the ‘minimise’ category are incurring costs to your business that do not justify the return they are providing. I categorise this type of client as ‘minimise’ because you do not want to completely burn this client group, but instead limit the amount of these clients in your portfolio. ‘Minimise’ clients may have potential to progress upward through the pyramid and become ‘growth’ clients that contribute a greater margin. However, you need to be very strategic and discerning with the amount of time you spend working on these clients, and channel your business’ resources into the more profitable segments of your client portfolio.

JB

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