In order to gain the most profitability from your customer base, you will need to drill down into each client’s portfolio and deliver on a well-defined service and product strategy
Many companies today still approach their client base with a ‘one size fits all’ mind-set when it comes to their supply chain processes and policies, over serving some customers and underserving others. Through the analyses of your profit profiles of both your customers and products, you can custom-build a more profitable CRM supply chain strategy to each client and thereby increase the overall profitability of their individual portfolios. In order to do so, you will need to consider the following:
1: Understand your products
Whether you are selling stationery, automation, Jan/San or furniture – or all of the above – you need to understand exactly which products give you the most profit, are best sellers, give a boost to another sale or are losing traction with customers. In a competitive market, this knowledge will be your mainstay of which products you should be promoting or not.
Use your CRM system to help you make your business decisions, tell you past behaviours and generate return sales in similar product lines. Your sales reports will show you which products are giving you the best margins, allowing you to further maximise your profits by finding where they can dovetail with other best-selling products. For example, who has purchased a mop but no cleaning fluid in the past month? While the mop itself may not deliver on the best margins, cleaning fluid can and will. Sales reports that deliver demand and cost-to-serve analysis* can help sales people to cross-sell additional product lines or undercut your competitors on a lower cost item since you are able to regain the profit from the second sale.
Technology will also assist you in scrutinising the different market segments and identify where to put your focus, i.e. which companies are looking to outsource their Jan/San servicing to a contractor; or the exponential growth in the number of educational facilities and the health care market which are seeing growth in cleanable space. It might also tell you that paper towels, facial tissue and toilet tissue are still the leading seller in this category, and that bin liners are the next hottest selling item, along with hard floor chemicals and cleaners and degreasers.
By understanding both your customers and your product combinations you can identify which are winners and which are losers, and then structure your supply chain policies so that some or all of the losers are turned into winners. For example, a stationery supplier which provides the same one-day lead time for both A customers and D customers may want to change the policy to three days for the D customers. This would move the inventory buffer point upstream in the supply chain, reducing overall inventory. The upstream buffer would hold a larger pool of inventory, thus increasing the odds that downstream demand will be satisfied with the exact product required. This change may have the effect of turning D customers into B customers.
2. Repeat versus new customers
It’s a well-known fact that it costs seven times more to grow a new customer than to retain an existing one. For the majority of businesses which see recurring revenue, these existing customers don’t just fuel growth, they represent all of the businesses’ profits.
With customer expectations higher today than ever before, the client also knows they have a choice to move over to your competitor if you don’t deliver. The simple 80/20 principle will serve you best here in identifying your most profitable customers instead of wasting efforts in chasing new customers. Identify which of your customers generate 80% of your sales, this will generally be about 20% of your current customer base.
This will also prove a strategy for SMEs facing competition from the big-box stores which win over those customers who are price shopping. By differentiating yourself from the box-movers by providing value on the back-end of purchases you can woo back price-conscious end users. Ensure your focus is on retaining customers by identifying which need reigniting, along with strategies to cross-sell, upsell and link-sell to your customer base.
In order to speed up your sales process, have a slightly different script for your different types of prospects which focusses on their problems. Then spend time making them feel special enough to become loyal to you. Ensure your service levels are excellent and your sales follow up on a par. People don’t buy products they buy solutions – people also buy from people – so make your contact personal and build their trust. The happier and more valued your current customer base feels, the more likely they will make repeat purchases and increase spend with you and not your competitor.
3. Be switched on, all the time
Use today’s technology tools to boost productivity and leverage it in order to simplify operations, improve service levels and at the same time reduce internal costs. Cloud based tools will ensure you stay connected to customer data, accounts, price lists, and current stock levels and will streamline communication and other processes, such as document revisions, so the team has more time to sell. Most importantly all data will be backed up all the time.
Since the best way to handle an economic downturn is to sell your way out of it, hire more sales staff to recoup lost margins and let them hit the road running to win more business. While your investment in technology will streamline your processes and productivity, your investment in human capital is the best asset in which to create revenue.
With mobile employees backed by the Cloud’s mobile technology you can save money in increasing efficiency and traveling time and shortening the sales cycle. At any chosen moment, a sales rep is able to see what orders a client placed last year, what stock has been delivered or not and instantly identify what the customer bought this year compared to last year. By placing your CRM in the cloud, you are afforded better scalability without time-consuming updates and licensing issues or loss of data due to power outages; and for SMEs the Cloud often ensures more security that they might have on their current IT systems. With big data the new watchword, you will need to adapt to these new technologies in order to boost your business decisions. If you think it is not for you, consider Amazon. They were one of the first companies to adopt business intelligence to analyse their customer’s buying behaviour through big data.
Social media can also assist in identifying what the market feels about your company and highlight issues with other suppliers. In addition, it can help you ‘read’ your crowd, for example which companies are focussing on sustainability and therefore interested in green cleaning products and equipment such as floor scrubbers that use less chemical products and machines that ionize water to help lift dirt particles.Today’s technology offers solutions such as e-commerce, back office automation, delivery optimisation and Internet purchasing and will empower you to handle more business and serve a greater number of customers using fewer resources – without the right technology, expect to be left behind.
*Cost to serve analysis: calculates the profitability of products, customers and routes to market, and provides a fact-based focus for decision making on service mix and operational changes for each customer.