For marketers simply finding customers who are willing to purchase their goods or services is not enough to build a successful marketing strategy. Instead, as we note in our definition of marketing in the What is Marketing? tutorial, marketers should look to manage customers in a way that will “identify, create and maintain satisfying relationships with customers.” By using marketing efforts that are designed to “maintain satisfying relationships” rather than simply pursuing a quick sale, the likelihood increases that customers will be more trusting of the marketer and exhibit a higher level of satisfaction with the organization. In turn, satisfied customers are more likely to become “good” customers.
For our purposes we define a “good” customer as one who holds the potential to undertake activities that offer long-term value to an organization. The activities performed by customers not only include purchasing products, these also include such things as:
- being more profitable as they buy more while costing less to satisfy
- making prompt payment for purchases
- offering suggestions for new products
- voluntarily promoting the company’s products to others
These activities along with many others represent the value (i.e., benefits obtained for costs spent) an organization receives from its customers. In the case of “good” customers their potential for providing value should be a signal for marketers to direct additional marketing efforts in building, strengthening and sustaining a relationship with these customers.
The fact that we place the descriptive term “good” in front of customers should not be taken lightly. Not all customers who currently have relationships with an organization (i.e., Existing Customers) should be treated on an equal level. Some consistently spend large sums to purchase products from an organization; others do not spend large sums but hold the potential to do so; and still others use up a large amount of an organization’s resources but contribute little revenue. Clearly there are lines of demarcation between those in the Existing Customer category. For marketers, identifying the line that separates “good” customers from others is critical for marketing success. For larger marketers, this may be done with so-called customer lifetime value (CLV) computer models that calculate a customer’s potential to contribute profitably to an organization. For smaller organizations, CLV assessment may be done using “gut instincts” gained from experience rather than by analytical means. No matter what method is used to assess the value of customers, limited resources force nearly all marketers to establish a line of separation that identifies customers offering value and those customers that do not.