The purpose of business is to create a customer.
– Peter Drucker
Every business creates customers, or it is no longer a business. But within every segment of a market, there are expensive customers and there are profitable customers.
They can be defined by looking at the “marginal cost,” or the amount it costs your business to serve a customer who orders something, every time they order.
So “expensive customers” are, by definition, those who have a high marginal cost, while highly “profitable” customers have the lowest marginal cost.
The most healthy and profitable businesses competing within a given market segment are those who attract and retain the most profitable customers within that segment.
In some businesses, the cost of servicing an expensive customer and a profitable customer might not be all that different. Not the case within the fine art and photo printing segment, however.
Because of the complex nature of fulfilling print orders, there is a very serious gap between the expensive customer and the profitable one.
The impact these customers have on the business servicing them is also very serious, and that’s the point of focus we’ll be honing in on in this article.
While there are many ways to identify an expensive customer within the fine art and photo printing segment, here are a few common characteristics:
Each time they order, they require a mix of phone calls and/or emails, and in many cases several communication touches.
In addition, you are forced to manually create an order invoice/receipt, process a credit card, get a new credit card when declined, email shipping information and/or tracking numbers, all while responding to questions and complaints.
They refuse (or you believe they would refuse) to order your printing services through a web ordering interface.
If you have a web ordering interface, these customers continue to call or email you, even after you do everything to get them to use technology to make things easier for both parties.
Since you can’t use technology to streamline order process efficiencies for your business, these customers are very costly.
The worst part is that their cost will be high for every single order, and it will never scale.
Sometimes, it’s not customer behavior that determines whether a customer is going to be expensive or not.
Sometimes a business, by its own very nature, turns otherwise profitable customers into expensive customers simply because they don’t offer a self-service ordering option which many would use if given the opportunity.
Examples of this are everywhere and are becoming more prevalent in every business.
Airlines offer self-service kiosks at the airport because they knew some customers could, and frankly would rather, serve themselves whenever possible to save time.
This allows airlines to not only attract more profitable customers who prefer this experience, but also to have a catalyst in place that would continually encourage less profitable customers to become more profitable customers (eventually, most customers who were used to using the counter would opt for self-service).
All in all, offering a self-service option empowers airlines to efficiently service more customers with less staff. Needless to say, it is a huge boon to profitability.
We’ve seen the same self-service kiosks at banks, and in supermarkets.
You can even do incredibly complex tasks via self-service, such as start a corporation or apply for a patent with LegalZoom.com.
Expensive customers limit your maximum revenue, suck resources and stifle growth.
If you only service expensive customers, there is a hard limit to how many of these customers your business can handle.
At some point, you can’t handle any more, and that limit is your maximum revenue.
You are so busy servicing expensive customers, that you don’t have time to service any new customers, and you aren’t exactly earning enough money to get yourself out of the situation you are in.
It’s like chasing your tail and whipping your behind all at the same time.
Usually, a fine art or photo printing company who primarily deals with expensive customers is a one-man band (or maybe 1 or 2 other employees) and has no time to do anything else.
Their resources have been completely sucked.
They are therefore forced to operate at a competitive disadvantage, because they should be charging a lot more to service these expensive customers.
But nowadays, with so much competition accessible online, it is increasingly difficult to do so.
You don’t want to lose customers, but at the same time, you know that having a printing business that only services expensive customers isn’t going anywhere.
With more art being sold online than in brick and mortar galleries, and the online art market now doing $2.65 billion annually and expected to triple by 2019, the artists and photographers that strictly rely on brick and mortar to sell their work will only see further declines.
The successful artists and photographers in 2016 and beyond will be the ones who have the ability to learn and manage an online art business.
This, unfortunately, requires understanding of the digital world and usage of technology.
It requires use of digital marketing strategies such as social media and email marketing.
Let’s face it, customers that are expensive by nature are less technology savvy and will be the ones most hurt as the offline art market gets increasingly cannibalized by the online.
Hopefully, your business doesn’t rely on these customers.
The expensive customer problem explains why there are no large fine art reproduction companies that do more than $10 million in annual sales.
There are, however, dozens of extremely large professional photo printing companies whose annual revenues are $10+ million, and some significantly higher than that.
Millers, White House Custom Colour, and Bay Photo Lab to name a few.
It’s because photographers, by nature, are easier and more profitable customers.
They use technological equipment (cameras, lenses, light meters, etc.). They already have digital images. They’re familiar with Photoshop or Lightroom. They likely download and upload files often.
In other words, photographers are, in general, pretty good at using technology.
It is not uncommon to find photographers in their 60’s who are impressively technology savvy. Serving customers like this is very scalable. It is also the reason that nearly every photo lab offers self-service ordering.
By comparison, fine artists tend to be very expensive customers because their business doesn’t inherently require them to understand or regularly use technology.
All in all, printing companies that primarily serve artists cannot scale, or at least none have done so yet, all of which should be very thought-provoking for businesses currently in this position.
This doesn’t in any way mean that ALL artists are expensive customers; there is absolutely a healthy, growing segment of highly profitable artists – and we will get into that in a minute.
Self-service is the only long-term solution to meeting customer expectations. Already, 70% of consumers expect a self-service option.
– Stephen Van Bellegem
The characteristics of the most profitable customers are as follows:
Profitable customers prefer to use technology to conduct business with you. They don’t care about your time, they care about their own time.
Their time is valuable and they want to save as much of it as possible. Anytime they cannot handle something with self-service it frustrates them.
If they ever need to talk to you about an order (which will happen from time to time), they call or email to get their answer, but always revert back to self-service whenever possible.
If your self-service isn’t good enough, and takes too much of their time, they will find it annoying and will actively seek out other options who make their life even easier than you do.
They understand how resolution and aspect ratios work and can easily prepare files for uploading without hand-holding.
These customers already know about printer technology, inks, and paper brands, and don’t need to ask you a million questions every single time they order.
Furthermore, when they initially landed on your website, they likely judged the quality of your business by reviewing what technology and materials you used and made a decision to buy based on that.
If they are new to the industry, they will take the time to learn the industry. Occasionally, they will call you and ask questions. They seek to learn because they want to become more self-sufficient.
Artists and photographers can both meet this criteria. Make sure your business is attracting them. Once you earn the business of someone you have recognized as a highly profitable customer, make an effort to keep them!
We now know that businesses, without realizing it, can actually be encouraging customers who would otherwise be profitable (those who would prefer to use the self-service kiosk) to become expensive customers (because there is no self-service kiosk).
A business should never take a profitable customer and add unnecessary costs to them. That itself is the definition of inefficiency.
The other, bigger problem is that a business who is attracting and primarily serving expensive customers is likely repelling the profitable customers.
We have established that the easier, more profitable customers are those who prefer self-service.
Therefore if you don’t offer self-service, the more profitable customers will take their business to someone who does.
Think about the customers you want to serve up front and focus on acquiring the right customers. The goal is to bring in and keep customers who you can provide value to and who are valuable to you.
– Jill Avery, Harvard Business School
So, ask yourself: what type of customers are you attracting?
Will this strategy ultimately take your business to where you’d like to see it go?
Make it easy to order from you!
Understand that self-service is part of providing great service. Don’t just do it now, but audit your process every year.
You’ll always attract the most profitable customers if your business truly cares about making it easy to conduct business with you.
Additionally, start making a concerted effort to continually turn less profitable customers into more profitable customers through education.
Give them more information to address the continual questions you are receiving and seek to assuage their fears.
For example, maybe you need to create a web page or a technical PDF on how to prepare files for uploading, explaining all the ins and outs and addressing all the fears they might have.
Give them ideas and strategies that will help them run better businesses so that your customers become the most successful and therefore the most profitable.
Take a look at this print studio email we recently received. Nearly every piece of it exists to educate expensive customers, turning them into profitable customers.
Let’s break it down piece by piece:
This print studio doesn’t want their phones ringing off the hook with routine questions, so they’ve taken a proactive approach to answer some possible inquiries up front – “How much is a 16″x20”? “What can I do to prepare my poster file before sending it to you?” “Do you offer certificates?”
Provide the customer with the information they need to get the best results possible from you. Investing in your customer’s success will only further your own.
If we can't teach you, no one can!