The costs of acquiring new business frequently surpasses that of selling more to existing customers by a factor 5-8!
No company can afford to serve customers who do not create some kind of value to the selling company. A Fall 2009 survey conducted by Business Danmark showed that 20% of the clients of every 4th company were bad customers. 85 pct. of sales persons answered positive on having customers, who do not create value!
How do you quickly and most efficiently turn-around a sales organization?
Your relationship with any customer is valuable just to the extent that your mutual needs are met. The only way you can decide whether to keep a customer is to rigorously analyze what you're getting out of the relationship.
Value for seller could be in the form of profit but may also be caused by other factors. A low profit customer might create value if its purchases increase seller's purchasing power significantly thus making seller more price competitive and thereby allow for higher margins on other customers. A strong reference in an industry, where other companies that industry tend to follow its purchasing patterns might be valuable even it margins are low. A loss bearing customer could be valuable if its an innovator or early adaptor of technology provided it gives your company and staff new know-how both on its business and technology.
The Freedom2Act is an an easy-to-use cloud-based Sales Opportunity Management tool, which provides management with powerful overviews for making better decisions regarding the utilization of the sales force by focusing these on the most valuable and profitable sales opportunities and portfolio segments.
Take the 20% of your existing customer base who create 80% of the sales. For each identified opportunity have sales staff spend 5-10 minutes answering a few simple qualification questions. Once this is completed push a button and you have access to charts, which make it easy to:
The figure below illustrates the selection criteria:
The X-axis is our share of the customers' purchases while the Y-axis represents our value.
The Our Share against Value Chart shows a circle for each opportunity placed dependent upon share and value.
The size of each circle corresponds to the size of the contract value while the color indicates which salesperson
Click on the figure to see a screen dump.