Will Pruning Your Business Build Your Brand ?


Nothing is more sacrosanct in Marketing than never giving up a customer. But is keeping all of your customers always the best way to build your brand? Here’s a possibly controversial view:  in the future it will become even more important to gracefully remove dissatisfied customers from your franchise–and this will be key to maintaining a healthy and growing brand.

Build Your Brand by Pruning Low Value Customers (visual courtesy of AdWeek)

Build Your Brand by Pruning Low Value Customers (visual courtesy of AdWeek)

This is because “recommendations from known people” is the most powerful form of advertising, and your detractors are likely hurting your brand more than you think. And as my recent blog post “How the Future Social Web will Transform Marketing” pointed out, word of mouth from friends will become vastly more important in the future.

Are all Customers Equal in Value ?

Not all customers are equally satisfied. Whether you’re using standard satisfaction metrics or Net Promoter Score, a customer satisfaction metric popularized by Fred Reichold in his book ‘The Ultimate Question,” it’s important to not just look at overall satisfaction, but to understand differences in customer satisfaction across products, channels, customer groups, acquisition channels, etc. to identify potential problem areas.

Net Promoter Scores -- Identifying High and Low Value Customers

Net Promoter Scores -- Identifying High and Low Value Customers

Customers are also not equal in economic value. Some are more valuable and some are less. Measuring the profitability or life-time value (LTV) of a customer is a complex, but important marketing metric.

Customer Lifetime Value -- Some Customers Are Unprofitable (courtesy of Pear Analytics)

Customer Lifetime Value -- Some Customers Are Unprofitable (courtesy of Pear Analytics)

Not surprisingly, customer satisfaction and lifetime value are related. More satisfied customers are generally more loyal, more willing to pay a higher price, less likely to switch brands based on promotions and price deals, and are more likely to generate positive word of mouth that positively benefits your brand. Conversely, less satisfied customers are likely to generate negative word of mouth. This is critically important because “recommendations from people known” is the single most trusted form of advertising based on a recent Nielsen study.

Building Trust -- Recommendations From Friends Count Most

Building Trust -- Recommendations From Friends Count Most

Measuring your various customer groups on satisfaction and customer profitability is the starting point for understanding whether pruning customers will build your brand. Slice your data to identify groups of customers with low satisfaction and/or profitability, understand why, and then determine whether the problem is economically solvable. If not, you have to ask whether it makes sense to prune the customers.

“De-Recommending” Your Brand

Because if you don’t, dissatisfied customers will be “de-recommending” your brand and eroding your hard earned brand equity. Research has shown that only about 5% of customers will complain, but of the balance 95% that don’t, they’ll not only remain dissatisfied but also tell an average of 9-10 people each about their poor experience. They are, in Net Promoter terms, brand detractors that hurt your brand.

 Examples Where Pruning Could Make Sense

  • Channel Experience — Customer satisfaction by channel — web, phone, retail, etc. is often significantly different. Should you shut down a channel ?
  • Product Variant — Product satisfaction frequently differs by product variant, with some variants having much lower satisfaction. Should you eliminate a product or product line ?
  • Acquisition Channel— Some acquisition vehicles deliver lower satisfaction and lower profit customers than others. Should you de-emphasize an acquisition channel or tactic ?

Gracefully cutting business lines and exiting dissatisfied and vocal customers from your franchise in these and other similar situations is important to building your brand. Why? Because exiting dissatisfied, low value customers will reduce negative word of mouth, improve your average satisfaction, and improve profitability. And not doing so will become ever more risky as the future social web enables customers to bring the opinions of their friends with them as they traverse the web and interact with products and services like yours.

Are you bold enough to build your brand by pruning your business ?

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3 Responses to Will Pruning Your Business Build Your Brand ?

  1. Andrea Levine says:

    you have to be smart about when to prune. Have you given it enough time to hy-grade your unprofitable customers, and/or sell them another product/service to deepen that relationship before you take that final action.

    Firing 1 of MM’s of B2C customers is one thing, but one of Ms of M2B customers is another. The principles remain true, but the discipline on true net profit per customer on a B2B side will never be as clean, so getting to that leap of faith on the undisputable truths (ie using sensitivites to find your challenging customers) is key. Would love to know from other B2B marketers how they are approaching this topic.

    • beardrs says:

      Hi Andrea — Thanks for reading the blog. Your point is a great one. When I wrote the post, I was thinking primarily of consumer business models, not B2B. Having said this, in principle, it seems to me that the same logic would apply IF you know that B2B customers network and talk among themselves and that you are at risk of a dissatisfied customer “de-recommending” you to other customers and prospects. Of course, the best approach is to understand their issues and work to address them successfully. Failing this, at some point you have to ask whether the incremental financial contribution from the customer outweighs the brand erosion thru negative word of mouth as the “detract” from your brand. Reichold provides a framework for how to do this calculation in his book “The Ultimate Question.” Your point is an excellent one and I’d love to hear from any other B2B marketers as to how they think about this.
      Randall

  2. Tejinder says:

    Various new methodologies are available on the block to predict Detractors, Persuadables and other such segments of B2B customers given there is sufficient sophistication is the available data to identify them. uplift is one such technique. The business questions it answers are relevant to marketers and combination models of multiple approaches could help solve complex business questions as whom to prune. Proactive identification of such detractors will help in saving the brand image but a great risk is loss of a good customer (depending on the quality of prediction). Losing a B2B customer may also result in base population shrinkage and hence such measures are suggested to be taken with precaution. marketing doesn’t believe in de-targeting and they always take pruning with a pinch of salt unless a great value is proven in the process (which will be very difficult without actual implementation)

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