Insight
Customer analysis
CUSTOMER ANALYSIS
ARE YOU FOCUSING ON THE RIGHT CUSTOMERS?
The ABC analysis of existing and potential customers enables the best possible planning of actions to boost turnover and acquire new contacts, while avoiding waste of energy.
All customers and prospects are important from a human and professional development perspective. However, when it comes to investing time and money in commercial efforts, a distinction is recommended. We often spend our energy dealing with customers or leads who are not really interested in us or who cannot buy our products or services.
Which customers and leads should
we focus our energies on?
we focus our energies on?
The ABC-analysis applied to customer segmentation is a strategic method, as well as a thinking model, for business development and planning. In broad terms, we could classify our customers into type A, the large customers, type B, the medium-sized customers and type C, the small customers. In doing so, however, we lose sight of the scalability of some in terms of turnover and the appropriateness of the commitment to one or the other. For a more precise analysis and to understand whether we are focusing on the right customers, we can draw a 4-area matrix, the so-called Boston matrix, on the X-axis of which we consider the purchasing potential of our current customers, in terms of their need for our products or services, and on the Y-axis the amount of active turnover or portfolio of orders developed with each of them, for example in the last year or the last two years.
Let’s proceed with the customer analysis and in the top right-hand box we mark the companies with which we have a high turnover and which we know have a high purchasing potential, either because they buy the same product in large quantities, or because they are susceptible to cross-selling, i.e. they might buy more of our products. We can call this the customer category A: they are satisfied clients to whom we do not have to make any extra commercial efforts, except for continuing to maintain a top-class service. In the top left-hand box, we collect customers with whom we invoice a lot, who are satisfied with us, but from whom we cannot expect a further increase in turnover, due to their current or future production capacities. These are the B1 customers, to whom our commitment does not need to be intensified beyond what we already do. Continuing our analysis, on the bottom right we place customers who generate little turnover, but who are still of great purchasing potential, and this can be objectively assessed by several metrics. These are the B2 customers who are statistically overlooked the most, but who are worth more sales efforts to convince them to buy more. Finally, in the left-hand box below, we almost certainly mark a large slice of customers, whom we call C, who generate very few sales and show just as much purchasing potential, but towards whom, strangely enough, we insist on devoting intensive order acquisition activities. It goes without saying that we should shift our energies from this category to the others if we want to increase our turnover.
Let’s proceed with the customer analysis and in the top right-hand box we mark the companies with which we have a high turnover and which we know have a high purchasing potential, either because they buy the same product in large quantities, or because they are susceptible to cross-selling, i.e. they might buy more of our products. We can call this the customer category A: they are satisfied clients to whom we do not have to make any extra commercial efforts, except for continuing to maintain a top-class service. In the top left-hand box, we collect customers with whom we invoice a lot, who are satisfied with us, but from whom we cannot expect a further increase in turnover, due to their current or future production capacities. These are the B1 customers, to whom our commitment does not need to be intensified beyond what we already do. Continuing our analysis, on the bottom right we place customers who generate little turnover, but who are still of great purchasing potential, and this can be objectively assessed by several metrics. These are the B2 customers who are statistically overlooked the most, but who are worth more sales efforts to convince them to buy more. Finally, in the left-hand box below, we almost certainly mark a large slice of customers, whom we call C, who generate very few sales and show just as much purchasing potential, but towards whom, strangely enough, we insist on devoting intensive order acquisition activities. It goes without saying that we should shift our energies from this category to the others if we want to increase our turnover.
Underneath the box that pictures the situation of active customers on whom we focus or should be focusing, we can draw two other boxes, useful to classify the leads that have not yet bought from us or with whom we have just come into contact. In the right box we place the leads that we will call Bx, on which we can safely focus to acquire and segment them again in the future. On the left hand side, we could group potential Cx leads, i.e. those who have never bought and, on closer inspection, do not have the capacity or potential to buy from us. These should therefore be held back from further acquisition activities. In many companies acquisition energies are wasted on Cx leads, because of a wrong or lack of analysis of their potential. Let’s think about how we could perform such an analysis and establish some guiding criteria for segmentation.
If you would like to learn more about how to segment current and potential customers, how to nurture relationships with customers and leads and how to implement an analysis that generates a modern business development process for your company, contact me for a free initial chat by filling out the contact form.
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