Recently we performed a pricing outlier analysis for one of our clients. Like any good pricing analyst would do, the team started with identifying customers receiving heavy discounts, or what we call “low hanging fruit." We realized that after addressing the low-hanging fruit and creating visibility via a dashboard, we needed to turn the organization’s attention to the high-paying, loyal, Relationship-buying outliers also. Why?
These high paying outliers were in churn danger.
When your highest paying customers churn, it’s particularly painful because they are often the most profitable customers. This means the cost of replacing these customers is especially high and they have a disproportional impact on your profitability. With this type of customer, their risk of churn tens of millions of dollars a year. That’s a risk worth addressing - pronto.
We recommended supporting the higher prices by:
- Augmenting their products with value-added services
- Spending time to uncover the value customers see in your products and services
- Identifying problems they are trying to solve in their markets.
Even if they reduce the churn risk by 25%, that is a big impact on their bottom line.