Often when companies set out to maximise the amount of new business they’re doing, they overlook one of the best places to start – their existing customer base. The term ‘new business’ is largely misunderstood, with many thinking that this refers exclusively to finding new customers that you’ve never dealt with; however, this is not always the case. New business can also mean a new order from an existing customer, which you’ve never previously received.
But how do we identify where potential new business lies within our existing customer portfolio? The answer is by understanding our clients and their needs, whilst aligning them to our own ideals and establishing whether or not they are a good fit. We do this by grading them.
Grading Your Customers – Put Yourself Back in the Driving Seat
Many companies employ a scattergun approach when it comes to their customers. That is, they will chase and accept orders from any client, regardless of whether or not they are an ideal match with the vendor’s business objectives. Whilst this may yield positive results in the short term, it will cause headaches if repeated often enough, resulting in a customer base rife with ad-hoc purchase orders and lacking in direction.
Initially it may seem like a controversial technique, but grading your customers in terms of their alignment will allow you to steer your business in the direction of your choosing. Additionally, it may also help you to identify potential new areas of expansion and provide you with insight as to which accreditations you should consider, as well as how to grow your capacity through the introduction of new machinery for which your customers have a high demand.
I mentioned the concept of TAMMING & PAMMING in a past post, but it is particularly relevant to the customer grading process. TAM (total available market) accounts for everything the customer buys, whilst PAM (potential available market) is anything that you can potentially sell them. For instance, the client may spend £1million annually on subcontract engineering processes (TAM), but only £200,000 of this may be on parts that you have the in-house capabilities to manufacture (PAM). By finding out what your customer spends the other £800,000 on, you can look at ways of tapping into this, therefore raising your potential available market and the amount of business you can do with a client. This information should become apparent during the customer grading process and subsequent trends will uncover opportunities for growth.
How Do I Start Grading My Customers?
First of all, you need to establish what a good customer looks like through your eyes. This may include factors such as:
- Total spend on subcontract engineering processes.
- The material of the parts that the client regularly subs out.
- Accreditations which the customer requires in order to service them.
- Industry that the buyer operates in.
- Size of company, i.e. do you prefer to work with OEMs or tier 1 subbies?
- Supplier friendliness, i.e. a company that pays on time and is easy to communicate with.
Remember, this is completely subjective and will vary from company to company. It pays to be specific when picturing your ideal customer, as it will afford you an additional facet of clarity at a later stage.
Pick your top three criteria – a ‘wishlist’, if you will.
How Does My Existing Customer Base Stack Up Against My Wishlist?
Once your wishlist is in place, you need to assemble a list of all of your existing customers. To be clear, this is anyone you’ve ever received a purchase order from – no matter how large or small.
If you don’t use a CRM system, then the most effective way of doing this is through an Excel spreadsheet. Make sure to include the company name and your contact, as well as columns to record how they measure up against each of your three criteria.
Now it’s time to fill in the blanks. Call each company and gather the information you’re missing from your wishlist. In my experience, most companies will cooperate if you explain that you’re cleaning your database – especially if you make sure to mention that you’re already an existing supplier of theirs.
The Grading System:
Once you’ve gathered all of the missing information, you can begin to grade your customers accordingly on a scale of A to C. This will allow you to see at a glance who the best accounts are and subsequently, where you should be targeting your sales efforts for maximum return.
The grading system should be as follows:
- A – These are the best companies, which meet all three of your wishlist criteria.
- B – Whilst not a perfect fit, ‘B’ companies still meet two out of the three specifications.
- C – Companies that meet just one – or none – of the criteria should be graded as a ‘C’.
Don’t panic if you have more B’s and C’s than A’s – this is to be expected when cross referencing against a set of specific criteria.
Building a Calling Schedule:
Setting aside dedicated time to nurture accounts is vital to their development. Grading your customers is an excellent starting point, but you cannot expect to see progress if you don’t utilise the data.
A graded database will allow you to streamline your sales process in accordance with your business objectives. It shows you where to focus your efforts when constructing a calling schedule, which in turn will yield results through constant rapport building.
Your calling schedule should look like this:
- ‘A’s’ should be called once or twice a week.
- ‘B’s’ should be called once or twice a month.
- ‘C’s’ should be called once per quarter.
Your calling schedule is a fluid entity, which can be subject to change and modification. However, it is extremely important that you are consistent with your approach. For example, it doesn’t matter if you have to move your calling time from Tuesday to Thursday, as long as it doesn’t fall out of your week altogether.
It’s also crucial to be just as rigorous with ‘B’ and ‘C’ accounts as it is with ‘A’ accounts. These are likely to make up a larger percentage of your client portfolio and due to the fact that most vendors aim to work with well-known companies, the customers with a lower grade are also more likely to be better payers!
In the next instalment, find out how to build lasting rapport with your existing customers that translates into increased orders.