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How do you decide which customers are more important than others?
No one wants to admit it, but every day we do things based on conscious or subconscious assumptions about which prospect or customer is more valuable. Do you pursue some leads more aggressively than other? Do you fight to get preferred pricing for one and not another? Which calls do you return first? The number of ways you can show preference is almost limitless.
Do you know why you have made these judgements? Have your experiences changed your approach?
Let's discuss.
Best Answer
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John,
Good question. Some things that I've seen related to customers:
(1) CLV - Customer Lifetime Value
Dr. V. Kumar lays out a new vision of not just using Customer Lifetime Value as traditionally calculation but also including CRV (Customer Referral Value), CIV (Customer Influence Value), and CKV (Customer Knowledge Value) for a more complete score or rating called CEV (Customer Engagement Value)
(2) With another client of mine, we implemented a simple rating system that scored Most Valuable Customers based on previous spending, and Most Growable Customers based on potential spending.
As it relates to prospects, the simplest and most common use that I've used is a weighted value based on potential revenue and expected probability of that revenue. While somewhat crude, it's easy to implement and helps key eyes on the right targets, especially in the era of constant distraction.
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What a great question, with fantastic responses. I'd like to expand on an aspect of Brian's comment.
I think one of the criteria is what a customer does to help extend our knowledge and ability to grow in market segments, to acquire new customers, to improve our credibility and experience base.
Take, for example, wanting to penetrate new market segment. Identifying a thought leader in that segment (even if the revenue potential from that customer may not be the greatest), winning that customer, then leveraging that experience to acquire new customers can be very powerful. It may be a difficult sale, but the leverage value (both through direct referrals and through experince gained) can dramatically reduce the cost and time of acquisition for new customers within that segment.
This represents more of a strategic evaluation than a tactic sales people might use in their day to day prioritization of sales opportunities.
Dave, your response does indeed expand the subject.. The ways that companies approach new markets are too often complicated, costly, and ineffective. I believe the first step is to both systematically and informally (no, they don't have to be contradictory) assess and communicate with thought leaders, market movers, writers and other influencers. In The Tipping Point, Malcolm Gladwell offers fascinating examples of how markets are really driven. Being able to feel the pulse of the market is not the result of "the Force being with you" as much as combining acquired knowledge, relevant experience, creativity and resourcefulness. It often takes you a lot farther than consultants, focus groups and surveys.
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Interesting and well-thought out answers, all. But a couple things jump out at me. As I am a career-long customer service guy, I became acutely aware of the difference between the salesperson's mentality and the service person's mentality. For instance, in Mark Williams' Best Answer, he refers to anyone who is not going to put money in your pocket right now as a "loser." He also takes the approach that if words are coming out of your mouth, those words must be selling to an active buyer, all the time.
As a 25 year service manager AND as lifelong consumer, I think those beliefs tend to be short-sighted. If you as a salesman haven't convinced me to buy from you right now, why does that make ME a loser? Maybe the reason I'm not buying right now is because the salesperson is nonstop pushing me to buy, and will talk about nothing else, as opposed to getting to know me. I may just be a number in the salesperson's eyes, but to me, I am a real person, and I buy from those with who I feel some sort of connection. As a service guy, I am a firm believer in relationship building and providing a great customer experience, because today's "loser" may end up being tomorrow's top customer or top referrer.
Dave Brock, I think, was the only person here who touched on the value of "influencers" as much as the ready-to-spend prospect. Depending on your industry and your product / service, all the best selling in the world is not necessarily going to result in a sale; some products or services are needed *only* when they are needed by the customer. For this reason, relationship-building is really important. Building a relationship with an influencer may not result in direct revenue from that influencer, but may indeed come from some of the folks he or she has sent your way. And that does not fit my definition of a "loser."
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Obviously the most profitable customer or partner should be the one to call first, but in reality, unless you are one of those highly disciplined people who take a stack of 50 poker chips and go through them every day making calls, it's most pleasant to call the people who are fun to talk with, where you have a personal relationship even if it is an email personal relationship. So this isn't particularly smart business, but it does contain a message -- if you make yourself that pleasant-to-talk to person, your profitable customer might call you ahead of others.
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I agree with the comments above, but I think there are many dimensions to consider. Here are just a few, ranking by priority, based on my experience:
-Overall impact to bottom line (total revenue and profitability)
-Resonance with culture (are they an ideal client based on your corporate vision, mission and core values)
-Fit current and future product/service mix (are they able to benefit from your complete offerings? Do they have room to grow?)
-Strategic value (are they a big brand name? Do they open other doors in the industry? Will case studies and testimonials benefit your organization?)
I hope this helps...
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I agree with Brian. New overlays to current Customer Lifetime Value are required. How else would you handle an individual banking customer with a low intrinsic lifetime value that has an active following of 100K that he can influence others to join or leave as highlighted in a recent article? (Aug. 2011 Harvard Business Review)
Logic suggests that its not just his personal lifetime value needs to be taken into account, but his potential impact to collective revenue positive or negative. Dr. V. Kumar' suggested values of CRV (Customer Referral Value), CIV (Customer Influence Value), and CKV (Customer Knowledge Value) for an overall CEV (Customer Engagement Value) rating provides the structure to help point the way.
It will be up to the business to pushing the envelope on how to measure these attributes consistently, how often these get refreshed and how much weight they have in an overall score.
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An interesting question which has produced some disquieting insights.
Your expanded question:
“My original intent was to get field-level insights on the conflicts (both psychological and institutional) between a company's requirements/guidelines and the knowledge, preferences, intuitions and best interests of the people who don't feed their families unless they convince someone to buy something.”
“Hungry families” seldom have a ‘Salesperson’ as their provider. However, I will work inside your assumption, which is just that that sales people are mainly feeding their families.
There IS conflict both psychological and institutional between who and when the Firm wants contact and who and when the Salesperson knows (reasons, believes or intuits) to contact. This dissonance is becoming ever more intense with CRM, SFA and Lead Generation systems producing “CONTACT” lists which are substantially different from the Salesperson’s desired contact list.
In Behavioral Analysis studies and Semi-structured interviews with Sales Top Performers the following matrix can be identified. They use a simple Importance/Urgency matrix.
They reject exterior Urgency and apply their own ‘personal standards’ of Importance.
How likely are they to buy (from me)?
This is a recurring factor.
But so also is: How much effort is involved in the sale?
(with a distinct preference for low hanging fruit)
You asked: “How do you decide which Customers are more important than others?”
Their Sales Behavior, in answer to this your first question,
‘maps’ effectively onto Vroom’s “Expectancy Theory” of Motivation.
What rewards(Extrinsic and Intrinsic) do I want?
How likely is it that I will get those Rewards?
How much effort will I have to put in to succeed?
And, finally: Are the rewards ‘equitable’ with MY effort and the actual outcome? As well as: How do MY rewards compare to the rewards others are achieving for similar effort?
Experienced Salespeople include:
“What actually happened LAST time?”
Hence they will AVOID (or FOCUS on) certain Customer ‘Types’, certain ‘Products’ in their portfolio
and certain situations like “special pricing”.
Brian, Pardon my exaggeration in describing what motivates sales people. However, I've found that many top producers see themselves (in a positive way) as the hunter whose sole purpose is to bring home their prey. Sometimes, it's the most successful who never lose their hunger.
Otherwise, your response included just the kind of specifics on thought processes that go on in determining priorities. Thanks.
Thank you John for your explanation and comment. It may interest you to follow a lively anmd profound discussion on "Hunters" on Linkedin http://lnkd.in/apJrpX
Having worked at the Company which invented the Hunter/Farmer idea and then abandoned it. I have to say, IMHO. I dont believe that they are useful constructs, and when we try to discuss their "Attributes" over a hundred Datums appear many of which are contradictory! But as the author of 'Braveheart' says:
Why let facts get in the way of a good story.
John,
There are any number of ways to answer these questions. It is determined by experience, intuition, and yes; sometimes assumptions (typically those assumptions have been based upon your experience with the customer or lack thereof).
Some leads are pursued more aggressively than others due to the relationship, or lack thereof, you have establised with the customer. If you have an established relationship and track record with a customer, a mutual trust gets built that allows you to move more aggressively toward the end goal. If there is not an esatblished relationship people tend to take a more ridgid approach to try and achieve the same result.
For me personnaly; experience and "feel" guides my every move with the customer, relationship or not.
V/R,
Mark
Dave,
Are you suggesting a loosely based type of partnership with the customer?
The type were as it isn't formal it allows both sides mutual benefit.
An example is where a manufacturing company shares its build schedule with its suppliers. This allows both parties to adjust their stock based on projected builds. It saves both parties monies as having stock on the shelf is costly to both parties.
I know this will not work in all cases but something on this idea of mutual benefit may go along way in the relationship.
Joseph, you can partner, but I wasn't referring to this directly in my comment. As an example, our company has chosen to expand into 2 new (for us) market segments. Rather than doing an all out blitz, we identified the top 2 "thought leaders" in each sector and focused on them. We did this for three reasons. We knew we would learn more about the segments and what we needed to do to be successful in the segment by working with these. We didn't have the resources to do an all out blitz, and we knew that if we closed a deal with one of the thought leaders, we could leverage both the experience of working with them, and the potential reference to dramatically shorten our sales cycles and improve win rates as we expanded our foot print in those markets.
Great idea Dave.
While at a network event I was talking to a gentleman who has his own business. He was complaining about the number of hours he was putting in since the economy downturn. I asked who he was marketing to. He said everybody. I said that is your first mistake.
We all have customers that I roughly place in 3 categories; 1.) "A" customers that love us and our business and we love working with them "B" customers that are pretty good to work with and we don't mind working with them "C" customers that we hate and want to dump. I told him to change his marketing material to attract "A" customers and that he would get more "B" customers as well. This worked out great for him. His business increased with better customers and he was working less hours.
The situation described sounds similar so it begs the question who are you marketing to? More of the better type of customers or everybody?
Thanks to all who are participating in this forum. Because this is the first such thread I have started in Focus, I was surprised to be given the somewhat embarrassing privilege of selecting the best answer. Bearing that awesome responsibility as best I can, here are my 2 cents.
My original intent was to get field-level insights on the conflicts (both psychological and institutional) between a company's requirements/guidelines and the knowledge, preferences, intuitions and best interests of the people who don't feed their families unless they convince someone to buy something. Taking a hindsight view of the question, I now see that it could be construed as a marketing question.
That's important because the answers by Brian, Kent and Charles, while valid for high-volume consumer marketing and customer retention driven organizations, and the leaders of large sales-driven companies, offer little value to sales teams trying to improve how they identify and commit time to those prospects who will deliver the greatest benefit.
The answers by Mark A. and Mark W. reflected the realities faced only by people responsible for closing sales. All experience sales people know that there are no formulas or statistical tools for determining who is going buy. Good sales people can either sense or determine quickly in a first contact who is worthy of their time. Great sales people do that and are able to do that AND shunt aside all of things that hamper most everyone else. Those were the top two answers. Mark W. was a little more forceful in closing the deal.
Thanks to all who are participating in this forum. Because this is the first such thread I have started in Focus, I was surprised to be given the somewhat embarrassing privilege of selecting the best answer. Bearing that awesome responsibility as best I can, here are my 2 cents.
My original intent was to get field-level insights on the conflicts (both psychological and institutional) between a company's requirements/guidelines and the knowledge, preferences, intuitions and best interests of the people who don't feed their families unless they convince someone to buy something. Taking a hindsight view of the question, I now see that it could be construed as a marketing question.
That's important because the answers by Brian, Kent and Charles, while valid for high-volume consumer marketing and customer retention driven organizations, and the leaders of large sales-driven companies, offer little value to sales teams trying to improve how they identify and commit time to those prospects who will deliver the greatest benefit.
The answers by Mark A. and Mark W. reflected the realities faced only by people responsible for closing sales. All experience sales people know that there are no formulas or statistical tools for determining who is going buy. Good sales people can either sense or determine quickly in a first contact who is worthy of their time. Great sales people do that and are able to do that AND shunt aside all of things that hamper most everyone else. Those were the top two answers. Mark W. was a little more forceful in closing the deal.
Well thank you John. By the way, I am currently entertaining a change in employers if anyone knows of a solid company in need of a sales manager.
Another issue arises in high-end strategic sales, such as new technology or software. At an IBM Wharton seminar for IBM business partners some years ago, the owner of a tech company asked how to know what salesmen were doing. He didn't want to fire a salesman 8 months into a 12-month sales cycle, but he didn't want to keep one who was 18 months into a 12-month sales cycle either. Two issues -- one is for the sales person, who has to manage expectations and explain where he/she is and what hurdles remain (In a complex product or service this might require a founder/owner/tech specialist to get involved.
The second is for the business executive -- how do you keep tabs on what sales people are doing? Talking with others in the field, advisory boards? Any ideas?
It is all too common (as well as hard to believe) that owners of companies struggle to comprehend what their sales people are doing. I've had to respond to the question face to face on a few occasions. Here are my follow up questions:
1) How critical is it to the success of the company that you know what your sales people are doing? The answer -- which can vary in both substance and truthfulness -- frames my choice of the next questions.
2) What reports do you receive? How often do you receive them? From what sources are they compiled? Who compiles them? Who reviews and signs off on them before they get to your desk? If sales supervisors and directors are receiving the reports the same time as the CEO or owner, it tells you a lot.
3) How often to you sit in on sales meetings? If an owner has time to attend an IBM Wharton seminar, but has not sat in on a sales meeting in two years, you may have the answer to that one pretty quickly.
4) How much time do you spend visiting privately with a customer and his or her sales person? I am suggesting without the VP, Director, Supervisor, etc. all there to massage both the customer and the owner.
5) WHAT IS YOUR COMPANY'S SALES PROCESS? I've asked that question and had more than one CEO ask: "Can you explain what you mean by sales process?"
5) What Sales Force Automation and-or Customer Relationship Management tools do you use? Who designed the functionality? What is the process for changes and improvements based on real-time results, experiences, etc.?
Those are probably the top five of more than 20 related questions that the owner needs to answer -- and then address the answers -- to know what's going on.
When I've laid those questions on the table, virtually all of the CEOs immediately direct their assistants to schedule them to sit in on the next appropriate sales meeting. More than 80% never show up. Guess what? The 20% of companies whose CEOs do show up, always improve their performance. The other 80% either continue to under-perform, are acquired, fail completely, or have a new CEO within a year.
I totally agree with Mark Austin. Being involved with leads/customers activities on a daily basis, you do build a "trust" with your lead/client and this you can transform in profits very easy after that. Specially when you are selling an advisory service like our company, where trust and performance is all that matters.
In terms of leads, from my experience it`s easy to see which will be a client and which will remain a lead. In matter of investments you need to work with open minded investors who understand all risks and rewards of investments. So with a little of sales experience, you will realise who fits your business recruitments.
It`s a long discussion and you can bring ionto it a lot of terms and concepts, but at the end, if you`re a good sales person you will know who will become a client, who will become a big client and who will remain a lead.
Hey Chuck, good points. My answer was based solely on the specific question, which was "“How do you decide which customers are more important than others?” To me anyway, the question was directed at salespeople and how we spend our time with prospects. When I use the term 'loser' I certainly am not referring to the individual as a loser but only as far as how I spend my time with that person. I do stand by my answer however that if you are spending time with 'non-buyers' (instead of losers) then you will not make quota and will be shown the door sooner rather than later. In sales, results are the ONLY thing that matters in the eyes on management and, unfortunately, effort takes a second place.
Another point I will make is that it hasn't always been this way. There was once a time when quotas didn't even exist. When I started out in the mid 80's, working for the then largest financial services company on the planet, we had no quota at all...but then we were on straight commission as well. In fact, I never had a quota until around 10 years ago...now almost every single sales organization uses quotas. I have my own theory as to why this has happened but that is a totally different topic...but I will get one point in in this discussion. The reason for quotas today is that management, for the majority, no longer plays an active part in the sales process. Most managers today sit in their ivory offices and push around numbers all day. They are not out in the field, nor do they even participate in active training programs directly with their people.Then at the end of the month, they sit and wonder why the numbers aren't in. As a direct result of this, more and more undue pressure has been put on salespeople to deliver sales with absolutely zero support from their managers. With this kind of dog-eat-dog approach to sales it is no wonder there is such turnover amongst both salespeople and sales 'managers' today. Hence, my answer is based on today's selling environment, not on the past when a true selling consultant could take time to handhold a prospect and take the time to sell or convince them to buy. Today, you either have a buyer or you do not...and if you don't then you had better move on quickly and spend your time with someone who is buying, or it's your arse.
I hope that you can see what I'm getting at here and, even though my answer may seem a bit harsh, understand that it is a realistic one.
Every customer is important.
In this economy, you cannot afford to lose even one customer. Every customer is important. Build your relationship; keep in touch with your customers; motivate them with sales incentives; let them know you care; follow up on a regular basis.
what a great question, and really difficult to answer for any individual, because conscious and unconscious sales both are based in individual capacity and pressure, supposed, if company build pressure to an employee about sales then an employee will attempt to get sales and done aggressiveness, emotionally, and will not consider the customer requirements, worth, instead he will consider to attempt sales on what ever condition. in this condition the individual conscious will death.
yes! this is perhaps the best question and dialogue I've seen for a while.
I am sure it has all been said before, so I can only add my summary: R/F/M analysis and looking at our customers as portfolio of assets to be managed, has for B2B firms always appeared to be the most pragmatic and appropriate-to-business-practices approach. That analysis can then be combined with core competencies to forward the overall customer strategy. There are , as so many of you have pointed out, multiple dimensions across multiple layers to ponder, however. Always an interesting question from a facilitator's perspective, of that I can assure you.
best, ngp
The guys at Profitably are working to solve this question with data.
(Transparency note, my dev shop consults for these guys.)
Having sold (for 30 years) face-to-face, at the distributor level, at the manufacturer level and now on the web - the most important customer is the one you have in front of you.
From the single mom working 3 jobs to support her family with "nothing to show for it" who paid me in 35 one hundred dollar bills safety pinned to her curtain to the head of catering of the Allstate Arena who was banned from buying from my company at the time - who placed a $120,000 order on my 58th sales call (about 18 months) because he got pissed at his approved supplier.
We're deep into social Media and look at tons of metric but the reality is "selling" hasn't changed since the beginning of time
Lead the sales conversation with questions
Buyers are liars (yes even at the corporate level)
Treat all objections as requests for information - not obstacles in the sales process.
Every lead had the potential to convert - if you feel you have a crystal ball and can determine which are the better leads (Glengarry Glen Ross) - why are still working?
Mike an intriguing response.
When you say you face to face sell "on the web" is this through a video portal?
58 sales calls is $2,000 revenue per call. The typical IT call rate is 32 calls per month, for a Targeted outcome of $100,000 per month or about $3,000 Revenue per call. If you had used 58 calls to close $120,000, in IT you would have ‘lost’ $1,000 Revenue per call and Year ended on 60-70% target. Perseverance is admirable, but in Sales may be counter productive.
“Buyers are liars” is a generalisation,
and is often is their response to “Sales Deception”
By definition an Objection is a difficulty statement not a question, if it were a question, then it would truly be a request for information.
e.g. “We only buy from IBM!” or “Are they not too expensive?”
The conversion rate of “Leads” (in IT and Telco) to “Opportunities” is about 2:1, by definition it is sub-optimal to follow ALL leads. Without the availability of a Crystal Ball, we have to use “judgement”.
Which Leads are best?
Which Opportunities are best?
Which Accounts are best?
Top Sales Performers have Focus.
“Glengarry Glengrant” did as much harm to Selling
as “Wall Street” did to Corporate Ethical Behaviour.
Selling, like Buying, is changing due to the same four forces, Social, Technological, Economic and Political. If your Selling has not changed in the last decade then you will disappear under the fifth factor “Competition”.
Selling still has some first principles, which have remained true since the dawn of time, but just as the way we heat our caves has changed so too did the way we Sell!
Brian
First off, it's Mitch
Please re-read the sentence - "Having sold (for 30 years) face-to-face, at the distributor level, at the manufacturer level and now on the web"
The flame is controlled better and the energy is delivered more efficiently, but just like a caveman, I heat my home with fire.
I was in 25 - 30 dealerships when I bought my last motorcycle - 25 - 30 sales people - we never talked about politics - once
Who knew a simple movie could corrupt an industry
Your negative energy can not be helpful to your consulting business - you really need to lighten up dude - you'll get more sales
Mitch, I couldn't agree more on the "Buyers are liars" bit, especially today. When I have coffee with my peers (all of whom have been in sales for at least 20 years) this is the number one topic of discussion. In the not so distant past (maybe 15 years ago) if someone said "Mark this looks great, come by on Tuesday and we'll sign", they meant exactly that, 95% of the time anyway. Today, if someone makes that same comment you can maybe believe it 50% of the time...and I only sell to C-level. In fact I have had this exact same scenario play out where the CFO of a company told me this on Friday and when I went to the arranged appointment on Tuesday I was informed that they had signed with another company on Monday...and the arse didn't even have the common courtesy to call me and let me know.
While this situation is true, the reasoning behind it is puzzling. As a group we have come to the conclusion, more or less, that this is a generational thing. Whatever the reason, you can't trust anyone today when they tell you the deal is done. Not that you ever could count your chickens, but the percentage of drop-outs after being told that you have a deal is MUCH higher now.
DISCLAIMER: For those that will say that "obviously you didn't tie down the customer" or "then the deal wasn't really closed" we as a group of veteran salespeople say hogwash. I am talking about 'deals' that were already hammered out, questions answered, objections uncovered and handled, etc...the works. The climate of selling has just simply changed. Maybe it's the economy or whatever but there is much less honor in sales today than ever before...and especially on the side of the buyer. For lack of a better description, prospects are a lot more 'flaky' now than ever before.
Mitch..."Buyers are Liars" is my favorite saying, becasue nothing is really finalized until the contract is signed. Whenever, I send out a contract or go to a client's office to deliver a contract, until it's signed, I am holding my breath. Sales Ethic as we had just 10 years ago, no longer exist! It's everyone for themselves and how much are you going to give me! "It's a doggie dog world out there and we're not the beefy bone, we're the flavored rswhide that we have to convince them that they want through rose colored glasses!" I stay on my clients like there's no tomorrow...Follow up...Follow up and pray that I can gain their business through service and commitment as well as knowledge.
@Mitch, how did your aggressive posturing payoff?
I have to admire your chutzpah but if you don't mind, I think I will advise that more research be done before you arrive in your B2B prospect's office. So much can be discovered beforehand and it saves snagging your tie on his desktop gee-gaws.
best
ngp
In 20 years of sales I was 100% commission - In 2000 I gave my ex-wife a half million dollar house and 4 cars - sales was berry go to me.
As a DSR for a foodservice distributor - there wasn't a competitors price list that I didn't either steal or gifted my way to get - actions that would put me on "60 Minutes" these days
With social media - there's much to be learned about people that didn't have access to 10 years ago. Conversely I've always belonged to the "bloody knuckles" club
When I sold high end tray line food service to hospitals, nursing homes & institutions it was very hard to get appointments with the head dietitians & chefs early on.
I bought a lab coat and made and ID badge at Kinkos - you'd be amazed at how much access that granted so I was able to begin the sales conversation with people cold once I could meet them and explain to them I could solve problems.
Ironically, I called on the galley at the Naval base in North Chicago, IL. It's one of the largest in the world and I moved around the base like I lived there - they had 6 or 7 smaller galleys..
Six Flags Great America was 10 minutes away - I got barred at every entry point and took months to get an appointment.
Takeaway - it's easer to crack a US Naval base than a US Amusement park
Takeaway it's easier to crack a US naval facility than an US amusement park.
Regarding the example "we're looking for a suit. We have money and credit cards in our wallet. The sales person asks 'can I help you find something?' We say 'no just looking'. We've just lied to a sales person 'everyone does it' . . .
A good salesperson doesn't ask "Can I help you with something?" It's a closed-end question that makes it easy for the customer to lie. A good salesperson asks something like: "Hi what brings you in today?"
And a closer first waits to see where your interests may lie - watches out of the corner of their eye to see what products you engage and then asks "Are you looking for a suit, shirt or tie?"
Should we treat all customers equally?
If you say yes, I’d suggest reading “Angel Customers & Demon Customers” by Larry Selden & Geoffrey Colvin - Why?
Because in a company that has more than thirty customers, the Pareto Principle will be evident. In a business that is large enough to be statistically significant, its sales, cost and profit data usually respond to a non-linear statistical distribution that contains the 80/20 rule.
This means that the top 20% of customers generates 80% of profit while the bottom 80% of customers generates only 20% of the profit.
Looking inside the famous 80/20 principle one usually finds that the top five percent of the customers generates close to 50% of the profits while the bottom 50% of the customers generates only 5% of the total profit.
It gets even worse as the bottom 40% usually generates no profit at all. Within this group some customers are slightly profitable, some are profit neutral and some are cash drainers.
This analysis is fundamental to understand who your strategic customers are, how they are different from key customers and standard accounts; and finally identify those in the cash drainer group to either make them profitable or get them fired. This would free valuable resources to be re-allocated to support profitable strategic and key accounts.
You need to know at any time of the month, quarter or year exactly which customers fall in each category, and understand the reasons why, in order to drive the profitability distribution towards a higher, more balanced and stable bottom line.
Believe it or not, many companies still have a hard time identifying which customers belong to each group. A strategic analytics solution can provide the right answers instantly. http://blog.strat-wise.com/2010/12/14/can-marketing-love-business-intelligenc...
The 80/20 Principle is a powerful strategic tool to differentiate the vital few (stars) from the trivial many (dogs), in order to plan the allocation of resources given to each customer segment strategically, in order to achieve profitable growth.
Regards, Bill
http://blog.strat-wise.com
Bill, Good point on the 80/20 rule. Of course the original 80/20 rule applied to salespeople...20% of salespeople bring in 80% of a company's revenue and visa versa. The reason that the top 20% bring in 80% of the business is that they don't waste time on non-buyers and only focus on prospects that are ready to buy now.
@Bill; in addition to Pareto's famous ratio, kaplan & norton preach the 20/200 rule: 20 % of your customers provide 200% of your profits. It can even be significantly greater than 200%; I've done the analysis for clients. My view may only apply to B2B, but I think the very best approach to this question is to use targeting/segmentation/ & customer valuation to build a resource allocation model. The idea is that your customers are a portfolio to be managed actively. A firm then invests in direct proportion to its expected return on investment. For my $0.02 the best application for Customer Relationship/Experience/ & Knowledge Management.
Hope that adds some value. best, ngp
There are more than one answer for this question.
For a start up or when you are lacking sales, the most valuable customer is the one that will close a deal the quicker. And in that case, the best customer is the one with the least resistance approach : he understand your offer, he knows the value of what you offer and he knows his needs.
For an established business, the selection can be much more sophisticated and can use other criteria like customer lifetime value, or perspective of recurring business.
The prospects are the lead generators for the business. the customers are well aware about the company and company reputation, and we only maintain the good rapport with them, but the prospects are those where we need to understand the business process and maintain good faith with them.
I realize that I am coming in very late to this question, and I think there are great responses and thanks to all for that. However, there is one answer that I didn't see that I am very passionate about with regards to actual customers and not necessarily prospects, so I will throw it into the mix.
From a CEO perspective, I do really think it is important to stay in touch with many customers as it is a great way to stay in touch with real life issues and not lose perspective in the "ivory tower" of corporate. Also, I feel it is critical to stay real close to your most demanding customer. Demanding is defined as one that pushes your company's product to the extreme as they need it to do more than it currently does. By understanding and satisfying these customers, all the customers down the line will get the benefit of the improved functionality.
I picked this concept up while at SGI when they were flying high. We constantly brought in NASA and Ford, because they needed more compute and graphics power to enable the creation of the vision that they saw. Every company that was not as demanding or "pushed the technology envelope" as much as NASA and Ford got the benefit of their insights.
Bob
Yes we shouldn't post pricing on our website, by doing so we can loose our customers. Might they don't come to talk about prices or ideas, what we do have.
I always loved the simple example of anyone of us walking into a store, we're looking for a suit. We have money and credit cards in our wallet. The sales person asks "can I help you find something?" We say "no just looking." We've just lied to a sales person "everyone does it"
I think people are more disingenuous today more than ever. Economic pressure has pushed "relationship" selling down the ladder.
That said, when sold B2B I was a firm believer in guerrilla sales tactics. If I knew the buyer wasn't going to leave the office, I'd find a reason to sit on or lean over the desk - show off a new watch a small picture. Move in & lower my voice while telling an off color joke. The goal was to read everything on the desk and credenza.
If they left the room I'd rifle file cabinets - any piece of information could push the sale forward. I was always motivated by the picture in my mind of the competitor coming into my home and taking that nights meal off my dinner table.
When in B2C direct sales I simply became a better liar than the prospect "you've been burned before? Let me tell you what happened to my grandmother...... 9 years of one call closing - our motto - "They buy or they die"
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With the pressures put on sales today to produce more and more, with quotas that only be described as ridiculous, I pursue leads based on prospects (they're not customers yet) that are ready to buy now. If they aren't ready to buy now, for whatever reason, then I don't waste time on them, period.
As far as pricing is concerned I will always try my best to do right by the customer, to the point of his or her happiness with the deal...and no more, obviously. The bottom line is that if you are dealing with someone who's only buying motive is price, then you're dealing with the wrong business in the first place. It is these client's that will become the thorn in your side down the road. Therefore, it is preferable to deal with clients who make the buying decision based solely on the product or service being sold as well as the company and rep doing the selling.
To the question regarding calls, sales calls in the order of readiness to buy now, obviously. Service calls and anything else takes a back seat. That is the reality of the situation so I won't sugar coat it. Hand holding can wait 30 minutes.
As to why I have made these judgements? Let me preface this statement by saying that I have always been in at least the top 10% in any sales organization and by and large in the top 5%. That being said, based on my 27 years experience in sales:
Deal with what you can deal with and handle what you can handle and all else be damned...you can't do anything about it anyway so why waste time on it? Handle things in the order of (1) making a sale (Putting money in your and your companies pocket), (2) putting out fires in order to make a sale, (3) urgent service calls (that will result in the client keeping your service, hence not losing commission) and (4) general customer service calls.
What most salespeople don't realize (even those that have been selling for decades in some cases) is that your most valuable asset is time. Not your talent, skills or anything else. I have seen plenty of extremely talented salespeople fail due to lousy time management. Conversely, I have seen mediocre salespeople excel because they didn't waste time on non-buyers. Just remember this: Do not waste time on losers, defined as such by anyone who is not going to put money in your pocket and do it NOW, period! When you are talking you had better be selling to an active buyer, anything else is just conversation... and you can save that for after hours at your favorite watering hole or with friends and family...while on the job DO the job.