1. Introduction

Remember Stan?

There are B films, D grades, and then there are C customers like S. Dupid.

??? C customer? What do you mean by a “C customer”? If there are C customers, are there D and F customers as well?

2. Segment your Customers

Anyone serving more than 3 customers develops a preference for some customers over others. Some of the employees on the customer side are nice, others are nasty, some have a clue, others don’t, some customers pay, others are not so willing to send a check or delay payment.

What you need to do as a Support department is differentiate the good, the bad and the ugly, because you want to treat each of these in a different way. Good customers deserve good service; bad customers deserve no service. You had better know to whom you want to deliver your service, because on the long run it’s a question of survival.

There are several segmentation criteria that can help you draw the line:

1) Annual profit per customer
Make a list of your customers based on the support contract volume to see which is the most profitable. In a list of 1000 customers, take the top 10 as the king class and the top 100 as premium customers. On the opposite end of the spectrum, you might check the bottom of the list - are you earning money with those customers, or are you paying the customer for delivering support to them? (This is not an F Customer, this is Z Customer.)

Annual profit per customer is the most valid criterion for ranking customers, but sometimes it is hard to calculate the necessary parameters, such as revenue and cost per customer.

2) Annual revenue volume of a customer
Calculating the cost per customer in Customer Support can easily end up in a very academic discussion – and does not help you with the objective to find your best customers. We can move forward to meet the objective by assuming that calculating the direct cost per customer is beyond our reach.

Again, make a list of your support contracts and customers to see who sent you the biggest check over the last year. In your list of 1000 customers, take the top 10 and top 100 again and find out whether you currently provide these customers with the same level of support and attention as customers further down the list. If so, you might want to consider giving your best customers some extra attention.
On the basis of revenue it is hard to find out the flops. In other words, you don’t find the F-Z Customers.

3) Yearly cost per customer
If, for some reason, you can calculate the cost but not the revenue per customer, then you might get a kind of inverted list and easily find the customer flops, but not your top customers. Although this list is helpful in creating some division in your customer list, you need to identify your top customers to take business action.

4) Loyalty and Value
Until now we have only looked at the hard numbers for the period of one year. However, most of the support contracts for application support have a longer life span. During the contract life span, the conditions of the support contract might change because the customer needs more of your software or more of your services.

Therefore, organizing your customers based on how long they have been your customer and checking the future business potential is an excellent basis for deciding whether or not walking an extra mile in your day-to-day support is a good investment.

There are other experiences with your customers that you can summarize under this criteria, for example, on how easy it was to test new services with this customer, whether the customer is responsive to surveys and so on.

Create a loyalty factor - best would be a rating that includes profitability. Stick it to the customer and observe it. Over time, you will find out how valuable the relationship with this customer is and what you need to achieve with other customers to make the relationship a win-win.

By basing your treatment of customers on this segmentation, you can make it appropriate: A king’s class for the good, a lighted exit sign for the bad, and an offer to change for the ugly.

About The Authors
Have you ever met a beardless Bavarian with an English appearance who speaks Chinese? Henry Goettler is one of them. You’ll meet this species especially in the support area – Henry is Director of Customer Support Global at Intershop and has been working for the last 11 Years as a process engineer and manager in the most exciting part of the IT business – Technical Support.

Kristine Vallila, currently a Customer Support Process Engineer with Intershop Communications, started in the IT business after completing a degree in literature. After three years in the industry, she has learned to combine these two seemingly conflicting worlds by emphasizing clear communication as part of her daily work, and making efficiency her hobby at home.