CUSTOMER
Are you fishing in a swimming pool?
Growing your top-line by prioritizing the right customers
Author
Christoffer Hansen
ch@hanei.se
CUSTOMER
PRIORITIZATION
Are you fishing in a swimming pool?
Growing your top-line by prioritizing the right customers
Author
Christoffer Hansen
ch@hanei.se
Many companies generally fail to see the forest for the trees, but the growth potential is often right in front of them. We get stuck in old habits and we just do things as we always have, e.g. most people have had the same morning routines for ages; the same goes for companies and their customers. If we do what we always have, we will get the same result.
Salespeople tend to focus on the customers they already know and therefore companies often do not focus on customers that are most attractive. With clear customer prioritization, companies will get a better understanding that can answer the following simple questions:
• Where do we get the most value for money in our customer and prospect database?
• How can we make optimal use of our sales force in order to spend sufficient time with customers and prospects with the largest potential?
A senior sales representative at a global manufacturing company once told me, that he had more than eight hundred dealers he had to visit and that they were all equally important. During our conversation, he told me it was extremely hard to reach his target. He was talking about a reduced territory and fewer customers. Furthermore, he had not visited a single prospect for a decade. I was surprised by his story and asked him how he prioritized his customers. I do not disagree that customers are equally important, but there is not time to serve all equally. So, is there a workaround?
Of course, but let us understand why first.
HOW ARE THINGS EVOLVING AND WHAT CAN YOU DO?
Every organization must do it, no matter if it is a large global corporation or a local grocery shop on the corner. It is no secret that some customers are more profitable than others. Being aware of these differences will allow companies to have different approaches to different segments. Customers have different needs and that is why customer segmentation is a necessity and it can help companies:
• Stay more focused on the customers’ needs
• Improve competitiveness, i.e. knowing where to be and not to be
• Improve their capability to expand the business organically by increasing share-of-wallet (SOW)
• Increase customer retention due to better customer service
• Optimize price by maximizing selling value rather than price.
CUSTOMER PRIORITIZATION IN A NUTSHELL
A company should decide which customers and prospects it wants to spend most efforts with. In a perfect world, a company should be able to give the same service to all their customers but that is not possible. There is just not enough time to support all customers equally, due to time, money and resources. The focus must be on the most attractive existing and potential customers.
Customer prioritization is about assessing which customers and prospects to work with for the upcoming period. That can change rapidly, so it is better to review the customer prioritization frequently. A rule of thumb is every quarter, but it depends on the industry and the products. Always keep some free time to run after great opportunities. On one hand, you want to stick to your plan and on the other, you want to be flexible.
STEP BY STEP
RANKING AND CLASSIFYING CUSTOMERS
CUSTOMER PRIORITIZATION FRAMEWORK
The framework contains two axis; existing sales and sales potential. Existing sales measures the attractiveness of all customers based on historical sales with your company. This means existing customers with large historical sales are prioritized. Sales potential measures the attractiveness of all customers in the market based on their sales potential to your company. This means customers with the largest sales potential are being prioritized.
GO FOR GROWTH
A global market leader in the industrial manufacturing industry was facing years of recession and cost-cutting programs. A new sales-focused CEO was appointed to increase the top-line. The board gave top management a clear objective: Go for growth. A commercial excellence team was established, a new CRM system was selected and lots of investments in the front-end was made. A commercial diagnosis was made, and their main objective was to focus on customer opportunities, i.e. how the company would benefit from focusing sales efforts around high potential customers and prospects.
A commercial excellence program was established, and the project included 40+ markets and should be rolled out in close collaboration with the local markets. The company decided to start with prioritizing its customers as it required relatively little effort and the upside was large. The main elements in the first wave included:
• Shifting from a territory-focus approach to a customer-focus approach
• Shifting from ad-hoc planning to active planning (rolling three weeks)
• Shifting from few or no prospects to 20 percent prospects of the portfolio
• Shifting from no visit targets to realistic visit target
• Shifting from dual customer ownership to single customer ownership
• Shifting from the ‘all customers are equally important’ approach to prioritizing customers and prospects based on their highest sales potential.
The approach was a combination of top-down and bottom-up. Data analysis combined with local knowledge was the recipe for success. The local salespeople were highly engaged in choosing the customers and prospects they wanted to work with going forward, as well as validating new potential prospects and setting realistic visit targets. The methods used were local kickoffs, ridealongs, and finally one to one meetings. The focus was always on the salespeople and how they could work smarter, not necessarily harder.
The company had an overall single-digit growth the year after the program, some markets had double-digit growth. Other effects of the program were increased time spent with prospects from zero to 20 percent, increased sales to both existing customer and prospects with a double-digit factor, and increased share-of-wallet with existing customers.
PITFALLS TO AVOID
• Avoid having a moving target, i.e. changing your customer lists too often or even not following them. Your customer list is supposed to be your compass, at least for a while.
• Utilizing only the top-down approach will not and will never fly. Always involve the salespeople. Many of them have extended knowledge about their market and industry.
THE LAST WORDS
• Involvement. Always involve the salespeople and their superiors in this exercise. They must own it and live with it. With no ownership in the process, it will most likely fail.
• Set visit targets. Otherwise, it is hard to measure success.
• Update your customer lists regularly. Avoid having customers lists carved in stone. Salespeople are flexible by nature and should be able to adjust their list.
• Spend time with prospects today because they could become your best customer in the future and you never know when your competitors make mistakes.
• Always keep the 80-20 principle in mind. 20 percent of your customers normally account for 80 percent of your sales; hence you should spend more time with the 20 percent.
PITFALLS TO AVOID
You will not catch any fish in a swimming pool. If you do not prioritize your customers properly, the likelihood of losing market share is impending. Customers and prospects should be selected based on historical sales and untapped sales potential. Try not to overcomplicate this as it is not rocket science, really. If you do not have a fancy CRM system, you can always use a good old spreadsheet. Just remember to measure, otherwise you risk getting back to square one again.
If you want to learn more and see some examples of how to do a proper customer prioritization in practice, feel free to reach out to us at Hanei Consulting Group.
If you want to learn more and see some examples of how to do a proper customer prioritization in practice, feel free to reach out to us at Hanei Consulting Group.
About us
We are a team of independent professionals from diverse backgrounds who want to make consulting simple. We have extensive experience from strategy- and technology consulting firms, start-ups, and corporations, where we have solved problems in 50+ countries – from start-ups to Fortune 500 companies. We are the architects of your growth.
