Would You Rather Have 100 Customers or 1,000 Customers?

Would you rather have 100 customers or 1,000 customers? What if the first customer segment paid $100 while the second customer segment paid $1?

It is obvious that the first customer segment represents the more valuable group.

But what if the first customer segment of 100 customers paid $100 while the second customer segment of 1,000 customers paid $10? Warning: This is a trick question.

The answer is still the first customer segment. Even though both customer segments generate the same amount of revenue, once we factor in operating expenses to service these customers, the net profit across both groups is no longer the same. From a systems perspective, it is better to have fewer high margin customers than lots of low margin customers. As in a real factory, you often have a choice of what to make.