The Bad-Customer Obstacle Course and How to Beat It
Dr. Jonathan Bein, President — Real Results Marketing
• WayPoint Analytics • big data • pricing strategies • Innovate for the Future • innovation • costing rules • business analytics • Randy MacLean • customer profitability analysis • Real Results Marketing • sales strategy • leading change • Dr. Jonathan Bein • money-losing customers • cost reduction • customer profitability • effective market segmentation • client segmentation matrix • Business Intelligence
Thursday, June 27, 2019—When using WayPoint there are some things we find that are so suprising and far off from what we expect to see, we have to go double-check the numbers because we fear we did something wrong in the programming or analytics that's leading to this outrageous data.
However, once we dig into it we find many little-known dynamics which have counter-intuitive effects on sales. The companies that do this with WayPoint, get an understanding of what is going on at these deeper levels, and can let these "unexpected currents" push them in the right direction.
Impressive companies used to make around 10-13% NBT, but now we're seeing companies at 22-26% of revenues getting all the way to the bottom line. It sounds preposterous, but we see it in the numbers every day. Much of our work has revolved around figuring out how companies are reaching these impressive rates, and it always tends to boil down to analytics.
Companies armed with a full analytical arsenal know what they should and should not do in situations where others would be guessing blindly. Companies without analytics may know what they should/shouldn't do, but their knowledge is wrong just as often as it is right.
If you've got large customers who are paying too high a price relative to their competition, they're at high risk of leaving you. All someone else must do is offer a better price, and they're gone. Successful distribution companies use WayPoint to determine which customers to approach with which strategy.
The highly efficient profit-generating accounts are kept safe from price hikes in order to keep these top customers happy. However, there's such things as "bad customers". These customers do business in ways that revolve around draining suppliers of time and resources, which makes them unprofitable for you. You can fire these customers, raise prices on them, or work out a new deal that makes the relationship healthy for both parties. Any of these options will improve your situation when you have these "profit vampires" as customers.
More of the wrong thing is worse.
In this area, it can be very easy to confuse expansion with improvement. However, if you're aiming at 25 target accounts, about 10 will be profitable, and about 15 of them will be unhealthy for your business to acquire due to their unprofitable habits. And companies not equipped with good analytics will be grabbing whichever accounts they can catch, because they're looking at markers that aren't actually connected to the productivity of each account. A company with analytical power will not only know which of those 10 profitable accounts to go for, but will be able to easily identify the problem in the case of any unprofitable customers that slip through the cracks, and can adjust accordingly.
How can you find out if you're taking in more losing accounts than winning ones? Look at your margins from 5-10 years ago. Can you make those margins still today? If not, you're bringing in more profit vampires than profitable customers.
For more information about Dr. Jonathan Bein, visit: www.realresultsmarketing.com