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SHAPING STRATEGY


Increasing Revenue Through Client Assessments: Easy as A, B, C


MARK MEHLING, MARKETING CONSULTANT Y


ou can’t treat everyone exactly the same, no matter how hard you try. Hug-


ging your family members cannot be equally applied to a person threaten- ing you physical harm. Sorry, but I treat people differently. Te same applies to your metalcast- ing business. Not all buyers/businesses are created equal. You can sharpen the bottom line by categorizing them. Once done, using a systematized approach, you also have the tools to discern and compare prospective new clients and quotes.


One of the best methods to increase


revenue is systematic client evaluation and selection. To start this exercise, close the door to the office, shut off the phone and email, put your feet up on the desk and think, “If I could create a profile of my BEST client, what characteristics would it have?” Order frequency? Revenue? Payment terms? Hassle factor? Order efficiency? De- livery schedule? Willingness to refer other business to you? Percentage of plant capacity? Tese and many other “your-busi- ness-specifically” questions form the “perfect client” framework. Once deter- mined, current clients can be compared to see how closely they come to this “perfect client.” Te framework also provides the plumb line to measure new clients. Every existing buyer, and new


ones, should be categorized against the “perfect client” using a repeatable system. You can use percentages; I prefer the simplicity of “A,” “B,” “C” or “D” customers. “A” customers are those you


love. Tey order often and in effi- cient quantities. Tey don’t require a tremendous amount of attention, pay on time and appreciate your company. Tey recommend you to others or would if asked. Tey are loyal and


overlook the minor problems that always occur. Te “B” category is a step down.


Maybe they don’t order as often but still are steady buyers. Tey are more demanding but not outside your reasonable expectations. Maybe you are the backup supplier for them. Tey may move up to the “A” category but are fine as Bs. (Properly handled, you can help them move to the “A” cat- egory, but that is another article). “C”s are only supporting the


base operation. Perhaps their orders, infrequent and not of large value, fill in to keep revenue flowing. Tey take up slack time to keep the furnace hot. Or they buy larger amounts but are tremendously difficult to keep satis- fied. Tey demand more of your time and have more issues. Or margins are smaller. Tey are seldom happy, and you would not ask them to refer others for fear their referrals are like them! Tey are unlikely to become Bs and usually not worth the effort to try. Anyone below these general guide-


lines is a “D” client. Tese need to go and fast. “D” clients are eating away at real profit and growth, never will be converted to A or B buyers, and cost money in staff time. Tey also keep you awake at night. Dan Kennedy, an astute business advisor, once said of his own clients “If I am in bed, two nights in a row, thinking about someone not directly related to me, they have to go.” Tis is peace of mind as well as a busi- ness health issue. Enough of D clients. Once categories are well defined,


several business judgments can be made: • Evaluate keeping B and C clients. In a previous Modern Casting column, the author recommended turning away orders that did not match your “best product” profile, meaning the order had the best margins and used plant capabili- ties to the fullest. Use the A,B and


C categorization to determine whether retaining an existing ac- count is worth any effort. You may choose to accept “less than optimal” orders from A and B customers, but not Cs.


• Use the “best client” profile to evalu- ate the acquisition cost of an “A” client. ROI can be refined when you adjust for A, B or C. For example, Client Lifetime Value of an A is much larger than a B, so it’s worth investing more to get an A than a B.


• Develop guidelines and decision triggers for customer retention. When a client threatens to leave for some minor perceived slight, you may want to let a C client go, while investing time, money and energy to keep the “A” company or buyer.


• Create guidelines for evaluating new clients. Who wouldn’t like having all A clients, right? With guidelines for evaluation, you know immediately if you are signing up with a C client when you quote.


• Modify quotes to reflect their sta- tus. You can add a visible or invisible “hassle fee” to accept a C client’s order. Or offer a priority upgrade or special shipping to get an A’s quotes. Treating everyone the same sounds nice but is not smart business. Te more you analyze and categorize, the easier it is to seek, service and retain the best, optimal clients. But you have to make the effort to classify them before you can get the benefits.


For an expanded conversation about this topic, email Mark@TeFoundryMarketer.com for an in- depth discussion on CD available free to Modern Casting subscribers.


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March 2014 MODERN CASTING | 81


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