Think About It… the e-book version

by Todd Youngblood

No sales rep ever wants to turn away any business from any customer. (Truth be told, neither do I!) There seems, however, to be more and more evidence that the number of unprofitable customers is a lot higher than you might think.

We all know that some customers are more profitable than others. Just about everybody can easily get their hands on a report that sorts them by gross profit margin. It’s net margin that really counts, however, so getting a grip on total cost of serving a customer is what matters.

Does a really close look at the true cost of sales and support customer by customer reveal anything surprising? I’d have to say, “No,” only because the revelation is more like shocking! Take a look at the graph that follows. It comes from a study by Dean & Company, and its message is that two-thirds of your accounts are probably costing you money. (Is that % a bit higher than you’d expect?)

The horizontal axis shows numbers of customers sorted from most to least profitable. The vertical axis shows the net profit margin. (e.g., at the very left, the net profit margin from the most profitable customer is more than 200%.)

Here’s an easy way to interpret the graph… Assume this company has 100 customers. The top 10 most profitable ones account for 85% of the total profit dollars. The next 10% contribute 40%, and the next 15% contribute 21%.
Simply put, 35% of the customers account for 146% of the profit dollars. The other 65% of the customers eat up 46% of the profit.

Does this scenario hold true for your company? What are your key sales and support processes? Who executes the activities that make up those processes and for whom? How long does it take and what does it cost? What return does each activity produce? Is there a better way to serve your costlier market segments?

Tough questions…

Without a well defined sales and support process that has been measured in detail over time, they’re impossible to answer. Maybe it is time to kick-off that Sales Process Engineering project…

by Todd Youngblood

You know your products and services have value to your prospects. You also know that people are starved for knowledge about adding value. So why don’t they want to talk to you?

Speaking of rocks and hard places… 100% of the decision makers you are chasing are both knowledge seekers and interruption avoiders. A tough gate-keeper plus hiding behind voice-mail can eliminate interruptions. Paradoxically, those tactics also dramatically reduce the flow of knowledge.

Maybe the idea of “Permission Marketing” can help resolve this dilemma.

If a prospect is “not interested at this time,” the implication is that at some time he or she will be interested. Why not politely ask for permission not only to check back in the future, but also to periodically provide bits of useful knowledge? (…like maybe via a less-than-60-seconds-to-read monthly newsletter…)

You may or may not remember, but you gave us permission to send this to you. Would you believe that since January, 2001, a monthly average of 22% of your fellow recipients have responded to us in some way? 22%!!!
That statistic tells me a few things.

• We’re providing useful ideas
• We’re perceived as value-adders, not interrupters
• We’re staying on our prospect’s radar screen!!!

We’re reaching the point where asking for permission to send Ideas! might become our only marketing program. (In other words, all by itself, the Ideas! permission marketing campaign is producing almost enough leads for us to make our numbers.)
Hmmmm…