Free Business Blog: Why you should be rating your customers

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Oct 31
Why you should be rating your customers

Why you should be rating your customers, and what to do once you have rated them.

Now don’t read this headline and think we are judging our customers. By rating your customers, or sorting them into categories, you can work out which customers you need to give more time to, which you need to spend less time on, and see those who have potential to be bumped up a category.

Let’s start by looking at a great customer. Once you know what your dream customer looks like it is much easier to rate your customers into categories. For most of us our great customers will: pay on time, place good sized orders, shout about you and help bring in new business. 

Exercise Number 1

Take a few minutes to jot down what your dream customer looks like. You can go as far as categorising them into specific age ranges, locations, a certain type of business or other demographics suitable to your business. Once you know who your dream customer is, you will probably have a fairly good idea about the type of customers you want to avoid. We all know the ones… you have to chase them for every payment, they ask for quote after quote, but rarely (if ever) place an order and they constantly try to get you down on price.

So how do we categorise our customers?

There are 4 main categories for our customers and it is as easy as A B C D….

A rated customers. Customers who get an A rating are our A* students and we can’t get enough of them! They love to shout from the rooftops about how fabulous your business is and they are a marketing tool as well as as a source of income for your business.

Here are 5 reasons why we love A rated customers:

  1. They pay on time
  2. They don’t quibble on price
  3. They promote your business
  4. They buy time and time again - they are regular customers
  5. Your team enjoy working with them

B rated customers. Now B customers aren’t far off from the A customers, but they just haven’t quite got that star quality that your A rated customers have. They might like the odd Facebook post and are prompt payers, but do they try and get their friends to buy from you too? They might occasionally ask for a discount or need a nudge to pay their latest invoice, but generally they are pretty good to work with and you are happy to keep them as customers. The most important thing is they are reliable.

C rated customers. So let’s talk about our C rated customers. Now these customers are the ones who order from you every now and then. They aren’t hugely profitable and sometimes their small orders leave you wondering if their orders worth taking at all. They will often try to get you down on price and you will most likely end up with a lot of back and forth before you get an order confirmed but they do still order from you.

D rated customers. D rated customers are those pesky customers that make you groan when you hear their voice on the other end of the phone, or when you see their name pop up in your inbox. If you work in an office or with a team you will all probably be aware of these customers and most likely hope you aren’t the one who ends up having to deal with them! They drain your resources and waste your time. If they do get around to placing an order they will most likely try and get the price down and not see the value in what you do, and once the order is placed getting a payment made on time can be like drawing blood from a stone! 

Here are 5 reasons why D customers are rated as D customers

  1. They don’t pay on time
  2. They will ask for quote upon quote before actually placing an order (if they place an order!)
  3. They don’t see the value in your business
  4. They might be rude to you or your team and just generally unpleasant to work with
  5. They don’t support your business and what you do, they use you when it is convenient for them

Exercise Number 2

Now you know how to rate your customers, sit down with a large piece of paper and divide it into a grid with 4 sections for your A, B, C and D customers and start to put your customers into each of these categories.  Certain customers will instantly spring to mind and not always for the right reasons. But of course you will have those dream customers that you know and love that you can pop straight into the A category. Now you don’t have to include everyone that has ever bought from you or made an enquiry, but go with the ones that stick in your mind, and alongside their names make a few notes about why they are in that category. This will help you in the next exercise. 

Of course it would be great to have loads of A customers who are constantly raving about you and your business. But don’t think too badly of your B and even sometimes your C customers. It is unlikely you will have more than 3-5 A rated customers, depending on the size of your business, so your B customers really are the bread and butter of what you do. They will be bringing in regular income, despite not being the all singing and all dancing customers like those who have an A rating. You can rely on them to be there constantly throughout your business year, and they are pretty easy to predict when it comes to the revenue they will produce for you. 

However, a few extra A rated customers is never a bad thing. Let’s look at a few ways you can convert some of those B customers into A customers…

Exercise Number 3

To start this exercise you will need to go back to the grid you made in Exercise 2. The key things you are looking for here are what your A customers are doing that your B customers aren’t. Let’s say they aren’t raving about you on social media as much as you would like. Why not think about a way you can reward them, let them know that you really appreciate their business. This could be in the form of a gift voucher to spend with you or within another business.

Take the time to find out who is the decision maker in that business and what makes them tick. Maybe you have found out from Instagram that they LOVE fresh flowers, and every time they receive a bunch they pop a picture on social media. Have you thought about sending them a bunch of flowers just to say thanks for being such a great customer. Not only can you support another local business whilst doing this gesture, when you order the flowers. But the likelihood is they will post it on their business or personal Instagram account and say how great it was to receive flowers from your business. Make sure you are following them on social media so they can easily find you and tag you.

Another great way to encourage your customers to post about you online is to post about them. This works really well if you are in a b2b (business to business) industry as you can promote their business at the same time. Why not do a shout out to some of your best clients, or those you love to work with. You could do this on your business Facebook stories, Twitter, Linked In or in your newsletter. Make sure to link through to their page or website and tag the business wherever you can. This will encourage them to share the content and they will (hopefully) repay the favour!

Now we need to talk about how to deal with those D customers… the Dead weights to your business.

Imagine you are going on a hike and you have a bag full of rocks, each one representing one of your D rated customers. As you get higher and higher up the mountain the weight of these rocks seems to get heavier and heavier. All you want to do is take the rocks out of your bag, so ask yourself what is stopping you?

By keeping the rocks in your bag your journey up the mountain will take longer, the rocks will slow you down and sap your energy and you will get more and more fed up. You will have to stop more regularly for water and to gain your energy back. The only sensible thing to do is to remove the rocks from your rucksack.

As you do this, even if just doing one or two at a time you will instantly feel a sense of relief and you will probably wonder why you hadn’t done it sooner!

So how to you remove these D rated customers from your business?

1. Pricing. The first and most obvious way to do this is to put your prices up. Now I don't mean this in a way to rip off your customers. But you probably need to put them up anyway. Can you remember when the last time you put your prices up was?

By increasing your prices those D customers who always argue the price will be put off, you won't constantly be getting knocked down and you won't have to be trying to explain the quality in the service or products you provide.

(Your A customers won't go anywhere because they see the value in what you do.)

2. Avoid the Back and Forth. In other words don't give them the time of day. Politely explain what you can do for them, give them a deadline to accept a quote or to buy from you or agree to your services and then stop. If they want to come back and buy from you, great. If not then you won't have spent your valuable time on D customers when you could have spent it on your A or B customers.

3. Referral. Refer them to someone else. A customer who is D rated for your business may be an A rated customer for another business. Usually they are D rated with your business because the customer-business fit just isn't right. Next time they ask for a quote or argue a price, explain that perhaps you aren't the right business for the job but you would highly recommend X and X who would be able to provide a better service then you can for the customer on this occasion. The customer will probably end up happier and they may even go on to recommend you in the future.

If you have completed the above and what some more great resources then check out these two fantastic video tutorials over at the Pretty Witty Academy.

Managing Your Customers

Great Customers