Your Best Prospects Mirror Your Best Customers

A robust customer review and analysis process can help identify and measure your key accounts along three key criteria: profitability, significance, and strategic importance. But its many benefits do not stop there. It can and should form the foundation for new client prospecting and acquisition.

Building on customer research that groups customers in three categories (highly profitable and loyal; modestly profitable and mostly loyal; and unhappy, disloyal, and unprofitable), we can utilize these data to better understand, profile, and identify prospects who fit best with our products, services, capabilities, and business processes.

What are some of the criteria used to conduct this analysis? 

At a high level, determining profitability is straightforward mathematical exercise. However, to build a complete picture, there are other questions to ask. Is the customer a slow payer? Do they have special requirements around order entry, shipping, billing? What amount of time do they require of our sales, service, production, and management team? Are there other costs of doing business with these accounts? What is the PITA (Pain in the Achilles) factor?

Strategic importance is determined by testing the extent to which our products and services are a good fit for what our customers require. Are we better equipped to service this customer than their best alternative (our competitors)? How healthy is the customer and what is their competitive position in the markets they serve? Are they poised for growth?  Might they be on the acquisition trail or could they be a target for merger/acquisition by a competitor (one client recently lost their top account when they were acquired by a larger, better capitalized company). What are the prospects for the customer’s industry?    

Significant factors include where the customer ranks in their industry/profession and what the prospects are for them to improve that position. Are there inherent or potential risks facing the customer? What is the state of their executive leadership?  Have they demonstrated a high level of innovation and growth? What can we learn from this customer and can/will they help us attract other customers that fit our capabilities?

Rigorous, disciplined account analysis can serve another critical function: Evaluating accounts of a potential acquisition target. Case in point.

Some years ago, one client was determined to grow through acquisitions. Their sales grew to about $50 million following the acquisition of a $16 million company consisting of about 250 accounts. The post-merger integration went reasonably well so they moved to another, smaller acquisition of a $4 million dollar company. This time however, the acquired company was servicing 1,600 accounts, each requiring the same amount of order entry, processing, shipping, and billing as their much larger accounts. The organizational upset this caused was dramatic. A three-day strategic session helped clarify which of these accounts could be saved and the conditions under which they would be serviced.

Growth is a necessary part of enterprise development. Strategic, targeted growth is well worth the investment of time and can bring about the kind of results enjoyed by the best performing companies.

For more information on how your organization can benefit from strategic account analysis, contact me at truncalephd@aol.com.