PROBLEM
This organization, featured
in last month's newsletter (to review this newsletter goto
www.supplyvelocity.com and click the "Archive Newsletter" link on the right
side of the homepage) is an in-house manufacturing division of a larger
residential construction company. They
grew very rapidly from a large, single account with a multi-year order, and were spun off as a separate
company. When the large multi-year order
ended, sales dropped precipitously.
The overhead costs in equipment and manufacturing space quickly created
a loss situation.
After developing the
Performance Measurement System, we quickly turned to growing sales and
improving sales productivity. All sales
metrics were in the "unacceptable" zone.
This included revenue, close rate ($ won / $ bid), gross profit and
repeat orders.
TOOLS
On-Target™ Sales
Strategy
DETAILS - Customer Ranking
1) Using the Sales Performance Scorecard we sorted all
customers by each measure. These
measures included sales, gross profit %, close rate and number of orders for
the last 24 months. (see the "Performance Data by Customer" tab)
www.supplyvelocity.com/Jan_2009_Data_Analysis_Table.xls
Note: We do not share actual client-data. I have created example data for this
Newsletter
2) Then the customers
were mathematically ranked by these measures and sorted into three Customer
Groupings (see the "X-Y Matrix" tab):
>Green = Top 12
Customers
>Yellow = Middle
>Red = Bottom 8
Customers
3) We created
specific account strategies for the top 12 (only 7 shown in the example) including identifying influencers, decision-makers, approvers
and end users. We worked on a "touch"
system to ensure they were in front of these various people. They are also working to get these people
into their production facility to show off their Lean processes (more on this
subject later).
4) They spoke with
the bottom 8 and discussed why they were being asked to bid their work, if the
chances of winning were almost non-existent.
I don't believe in the term "firing customers" but everyone deserves to
earn a profit from all customers. If
this is not possible then there is no basis for this economic relationship.
IMPACT ON PEOPLE
1) Most people in the
company eagerly embraced this more targeted sales and marketing strategy.
2) Estimators love it
because they don't waste their time creating bids for companies that don't
buy. Operations likes working with customers
that they can get to know better.
3) However, a couple
of the sales representatives, who used more of a scatter-prospecting approach,
could not adjust. They were not able to
switch to building relationships with their top accounts and were not focused
in their selling. They continued to go
after the large bids, for new customers, even though we proved we were not
succeeding at these. So they were let
go, in favor of more relationship-focused sales representatives.
RESULTS & SUMMARY
1) They now have an
ongoing customer-classification system, so they can focus their attention and
service on their best customers
2) Within
two months the backlog grew by 60%.
Close rate improved by 25%.
