Who do you really want to do business with? When working with clients we often find that the customer portfolio could do with a really big shake up. That is to say there are customers that provide significant value and there are those who do not! The problem is that it is often less than clear which customer falls into which category. The reason for this is that typical accounting systems find it hard to factor in issues such as the length of time it takes to service a customer or the number of orders that a customer places for the value of business received. These and other factors can significantly affect the overall profitability generated by individual customers.
Think of it by way of an example. You are a builders’ merchant and you sell the same amount/value of materials to customers A and B. Therefore, the gross margin created is the same. However, customer A requires you to deliver to site whereas customer B collects the materials. At this level, the delivery costs (which in this example are not charged to the customer) associated with customer A reduce its overall level of profitability.
So, we need to be clear about the type of customer we really want to do business with. Not only that but that clarity of target customer definition (and existing customer) needs to be effectively communicated and understood throughout the business and particularly within the marketing and sales teams. Providing that clarity is not necessarily hard; quite often it only requires a conversation between team members to set out the criteria that go to make up an “attractive” customer. A lot of the criteria will be intuitive. The issue is to have that openness such that all people within the business know the type of business that the company is looking to attract and retain.
Having understood who we would like to do business with, consider next whether you have a really good understanding of the challenges and issues facing your customers that you want to retain. What are the significant problems that they are facing? If your customer contact asked you to perform a 15-minute presentation to the customer’s senior management team on the topic of their challenges, how confident would you be in delivering such a presentation?
When rebuilding and developing the business, the focus needs to be to take time to make sure that your understanding of the problems that are uppermost in customers’ minds are really the ones that the customer would appreciate help in solving. By checking in with your customers, not only will you enhance your relationship as you are showing that you care but you might even get a sense of new ways in which you can help them achieve their business objectives and, in so doing, achieve yours.
Reach Revenue works with business owners, leaders and investors to develop high performing sales and marketing teams aligned to the strategic objectives of their business. To find out how we can help you, please call 0203 858 8030 or email email@example.com