ARE YOU FOLLOWING THE MONEY OR CHASING UNICORNS?
In an increasingly evolving world where new technologies, theories, frameworks & trends tend to pass old school ways by there are still some time tested & proven sales planning techniques that remain as valuable as ever.
One aspect of sales planning that we see providing as many light bulb moments as any in working with our customers is the exercise of categorising their customers.
When we work with new customers to help them grow their business, it is surprising how many of them don’t necessarily understand where their business comes from. One of the first exercises we run through with them is an analysis of the last three years sales results by customer.
A simple comparison year on year will highlight customer gains and losses. Many businesses will experience the short term gain of a significant project or customer spend that is a one off. Those anomalies are easy explained. Through such analysis you are looking to highlight previously good customers whose spend is reducing. In such cases a level of investigation is required to understand why. Are they losing business themselves? Are you losing business to a competitor and if so why? Conversely customers whose spend has increased over time need to be understood also.
As an example, the analysis B2B Company Ltd sales results for the past FY revealed the following:
Although this is an example the results are not dissimilar to many companies we have worked with. This shows that 30% of their sales comes from two customers, with the top ten customers contributing 80% of the business. On the flip side we can see that the bottom 30 customers, or tail, only contributes 10% of sales turnover. In many cases the tail can be very long.
Determining sensible criteria to categorising your customer base against will determine how you manage the necessary proactive customer interactions.
The following is a practical guideline:
Platinum – These customers are Critical. There may only be 1 or 2 in your business, but they are your best customers. They are not critical in the sense that your business would fail without them, as that would indicate a lack of wider planning. However, in terms of determining priorities in attending to customer matters they take precedent.
Gold – These customers are Strategic; they will be the top echelon of customers and the significant portion of your revenue. Your team will have layered relationships with the customer team.
Silver – These are Tactical; with some work they could grow to become Gold customers. By volume of customers they will be the significant number.
Bronze - This are Operational customers, generally the “tail” of your customer list with low requirement for your services but when they need them they use you.
Once categorised you can determine the frequency of proactive customer interaction and customer activities. For example; Platinum customer interaction could be monthly operation meetings, quarterly business review meetings and an annual strategic meeting with appropriate staff from each party involved at each stage. Conversely for Bronze customer, a six monthly catch up meeting and 3 monthly phone calls may be appropriate. Complementing these interactions will be digital marketing activities tailored to suit respective needs. All of which should be aligned with territory plans and integrated into your CRM.
Thinking back to our example the customers could be categorised as follows:
Understanding your customer base in this way is powerful and can ensure sales focus and internal customer service strategies are aligned. Whilst maintaining high customer service standards are important for all customers, the worst thing you can do is drop the ball with a gold customer because you were over servicing a bronze customer.
As one of our customers said recently:
“Looks like I’ve been spending too much time chasing unicorns instead of focussing on where the money is coming from!”
This exercise will invariably highlight customers on whom you should spend more time and those you should spend less on. That’s doesn’t mean dropping your standards or ghosting customers, it simply means working smarter as a team to maximise resources & relationship management processes accordingly. As a valued mentor of mine once said:
“Be gracious with people, but frugal with time”
Think about your customer base, how would you categorise them using the above model and why?