Client Loyalty vs. Profitability: Does Your Company Know the Difference?

What criteria go into the decision-making process to bring on a new client vs. keeping a client? Often, growing companies still use the same criteria they used when they were young and starving:

• Size of the sale
• Potential profits
• Future potential
• Proximity
• Goodwill gained by working with the client, regardless of profits
• Potential for experience gained by working on their projects, regardless of profits
• “We don’t say ‘no’ to new business…ever.”

While many of these criteria are still applicable for growing and/or mature companies, a recent case study by Robert Kaplan in Harvard Business Weekly gives a good example of what could happen when companies don’t examine and (if necessary) re-align their customer base on a regular basis.

The lesson to be learned is this: if it makes sense for manufacturing companies to continually re-examine their product line to ensure they’re only producing profitable products, that same thinking holds true for your company’s client base.

Read Kaplan’s full case study here: HBR Case Study