Adding an extra item to every fifth order can drastically increase your profits. With access…
Improving Your Product Mix: Determining Who Buys A But Not B
Only in the rarest of cases do customers buy most of their products from a single distributor. It’s an easy exercise to determine what products your customers are currently buying from you; however, trying to determine what your customers are not buying from you is like seeking a needle in a haystack where the needle is invisible and the haystack is locked in a random competitor’s warehouse. Increasing a customer’s spend not only increases revenues and profits, but it improves customer loyalty as well. Customers would prefer to work with a shorter list of trusted suppliers but they often don’t know your entire product line.
Improving your product mix with each customer involves much more than just analyzing which complementary products they might purchase together, although such an analysis is a good place to start. You need to understand your customer profiles so that you know you are comparing the right customers purchasing behavior. When you understand your customers segments, you can understand which customers buy products “A,” and “B,” together to generate a consistent and deeper analysis of who is buying product “A,” but not product “B.” If you’re not comparing the right customers to each other, it doesn’t matter if your report card shows a gap in their product mix because they may have much different motives for their purchasing behavior.
A distribution-specific CRM system can make this analysis much easier for you by tying your marketing and sales data to your ERP history. Here are some suggestions to point you in the right direction in your profiling:
- Basic Demographics. Start with some obvious demographic data like geography, line of business and company size. Grouping your customers in this basic way may show you some larger patterns in their spending habits.
- Revenue and Profitability. Next take a look at customers with similar sales and profitability levels. Compared to similar customers, is their sales volume going up or down? Does that trend match similar customers or is there a potential issue with that customer you might need to address. By running a year-to-date against a previous year-to-date analysis it is easy to identify those customers who are, for example, projecting to be at less than 100% of where they were last year. If a customer is down in one or more targeted product groups you can quickly identify at-risk customers.
- Customer History. Compare customers based on how long they’ve been your customer. It may take time to develop a level of trust with new customers regardless of your strength and depth in their industry.
- Purchasing Breadth. It can be helpful to analyze different customers beyond their basic sales figures but also based on the breadth of product they buy. Compare their recency (when was their last order), frequency (what is the rhythm of their purchases) and consistency (are their orders similar or all over the map). Some customers may take a long time between purchases, so it is helpful to analyze how many times particular items show up on their orders.
- Cost to Serve. Finally it is helpful to understand your cost to serve a group of customers. Is their average order size small or large? Do they take a long time to pay? Increasing your share of wallet with a customer can help defray the cost of each transaction by spreading transaction costs across a larger invoice.
When you’re to the point where you think you are comparing the right customers for actionable data, it is time to target tactical sales to get your customers to buy more from you and less from your competitors. Unfortunately, many distributors leave it up to their customers to search through large catalogs and online listings. Because it can be so difficult for a customer to do this research on their own, they often just make the same purchases they’ve always made. They continue to buy from your competitors because they don’t understand your entire product line and you haven’t made it convenient enough for them to switch.
This is where a customer report card comes into play. A report card is a high-level overview of their year-to-date purchases as well as a summary of their purchases from the previous year. This data is organized into the major product lines you carry. Running a report card is easy with SMP. You simply open the Customer Information Screen and run the “Report Card” report. Your sales reps now have valuable selling tool for their next customer visit in less than a minute. Your reps can easily start a conversation about your product lines, your customers’ needs and offer to quote for more of their business.
Robust and actionable data from SMP combined with messaging tools and our tight integration to your distribution ERP system can result in numerous opportunities to increase your share of your customers’ wallets. With SMP you can:
- provide immediate communication to customers when a particular discount or vendor rebate is available to extend the lines they purchase from you.
- create one-to-one messages based on your customers buying profiles
- provide your staff with data that makes their jobs easier, like transaction history from your back-end systems
- create reports and dashboards that identify new product positioning opportunities