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Small Customer Management

Your outside sales force is fully utilised? There is no time at all for managing your numerous small customers with low sales? And this does not seem to be profitable anyway? Read here how you get out of this dilemma using active small customer management and how you can even work this customer segment profitably.

Small customer management: What do I do with my small customers in B2B sales?

There is hardly anyone saying it out loud: but small customers are secretly a bother to many sales professionals. The effort for managing them seems to be almost as much as that for key customers. But they only generate a fraction of the sales that top-rated customers do. In a cost/benefit analysis, small or C-rated customers quickly fall through the cracks. What is frequently left outside of consideration meanwhile: even the large number of customers in this segment is valuable for your business. With the right strategy and suitable processes, you will get these loyal customers to commit to the company for the long term. Not only with big effort but with a profit!

EVERY BIT HELPS

SALES!

Why small customer management?

Today, we experience primarily embattled markets with crowding out: if you do not make the deal, your competitors will. Once the customer is lost, it will be expensive to get him back.

Of course, this is also true for small customers. Even if small customers are often labelled as being a nuisance in everyday sales routine: “They are stealing our time!” or “It’s not worth it to manage them!” But it applies instead: who pays attention to the small customer will be awarded with an extremely loyal customer and growing sales with high contribution margin. With a strategically organised small customer management, uniting sales, marketing and service, your small customers will grow – and profitably so.

Many decision-makers start with small customer management at their company according to the motto “every bit helps.” But they find out quickly: With the right strategy, small customers are even much more profitable than their reputation.

 

What is active and passive small customer management in B2B sales?

Many companies believe that great efforts should be expended for large customers and little effort for small customers. But C-customers have needs just as diversified as those of large customers when it comes to delivery, price and management. This is where standardised management seems to be difficult. This is why companies with a large number of small customers often deliberately decide for or against an active small customer management.

  • Passive small customer management: This is where you pick up the sales of your C-rated customers without further efforts on the part of your sales organisation
  • Active small customer management: There are two completely different variants. Either you decide wholly against your small customers and get rid of them. Or you do the opposite and specifically expand your small customers.
Model of strategic process in small customer management

How do I identify my small customers?

Small customers, C-customers, mass-market customers, smart accounts are the customers of a business, which have a relatively low value for the seller. However, they can be very interesting economically as a customer segment.

Potential customers are not small customers

Potential customers are customers of a company, who currently have a relatively low value for the seller but which could develop based on the growth or the still low share of wallet. The share of wallet here indicates how much in percent of its budget the customer pays to your company for certain products or services.

Evaluate your C-customers by costs and capacity and this results in:

  • Many and small customers with low sales potential and a large number of transactions
  • Small customers with high sales potential, which, however, they do not realise with your company – small share of wallet
  • Customers where a regular ADM visit does not amortise the costs of the visit
  • Customers where competitors are rarely active
  • Customers without procurement power

How do I delineate small customers from other customer segments?

Assess the definitions for small customers that exist at your company. Should there be none, then help yourself out with a simple query:

Which customers have not been visited by the outside sales force in the past 12 months?

You can find this out in the CRM as a standard report.
Alternatively, run a query in the ERP system:

Which customers have not purchased anything in the past year or who have done a purchase for sales of less than XX euro p.a.?

Or assess the sales threshold from which management by the outside sales force can be profitable or not.

Calculation of management costs

Assumption per year: 4-6 customer visits per year are needed for a customer to “feel the management.”

Calculation costs per customer visit
Calculation costs for customer management

* Costs without other sales costs (e.g. sales software costs, proportionate allowance of the annual salary of the sales director, etc.)


Assess the profit threshold for sales or potentials

Assumption per year: The sales costs at your company may be at most 8% of sales. The sales threshold for management by the outside sales force is calculated as follows:

Calculation sales profit threshold

 

Based on these two approximations, you should have already identified a large group of customers, which belong to the small customer segment in terms of sales at the first glance.

Does the active sales management of C-customers pay out for me?

One thing off the top: the systematic small customer management can pay off only if you work with an inside sales staff or contact centre actively promoting sales. A traditional office staff is not suitable for this approach. This is because, the latter manages small customers only “on call” or only responds to requests but does not sell.

The best calculation approach is provided by the possible sales potential harboured in the customer group. For industry groups, e.g. craftspeople or even more homogenous customer types such as bakeries or hotels, this is particularly successful.

Example calculation for the “electricians” industry:

How many employees does an average C-rated and D-rated customer business have? – Example: 3 employees

What sales potential can you calculate per employee in the customer business? – Counter value of products that one employee can install per year – Example: EUR 9,000

How many small customers do you maintain in your database? – Example: 4,000 customers

Calculation sales potential each small customer

If this group is not homogenous, you can only make a rough estimate using data from the past. Notice the sales progression per customer over the past 5 years. The highest sales value indicates the customer’s possible sales potential.

This percentage rate, multiplied by the number of identified customers in this customer group results in the potential value for the entire group. Here, you assess the average contribution margin, which is usually a higher percentage value than of your large customers.

The absolute sales potential or the absolute contribution margin is now the benchmark for the costs that you expend to manage this customer group.

Assume that one employee in the inside sales team that actively promotes sales can regularly manage between 350 and 450 customers. The costs for such an employee vs. the contribution margin from 350-450 customers then shows if the expansion of the team is worthwhile.

C-customer processing: Which tasks do I assign to inside sales?

You create your small customers in the CRM in the same way as you would also do for an outside sales assignment. With one difference: The C-customer is now assigned to an employee in the active sales inside sales department. Here, too, each customer has only one contact person.

The inside sales employees tasks include getting to know his customers, understanding the customer’s business model and deriving the actual potential for your company.

He or she then manages the customer specifically according to the defined tasks, such as knowing requirements, conducting sales talks or customer loyalty measures, in part also supported by marketing campaigns.

Goals of the inside sales employee:

  • Raising sales with his or her customers for the long term,
  • Detecting threatening losses of customer early on and counteracting them.

A well-managed small customer group can be the backbone for difficult financial times!

How can I tell if my small customer management is successful?

After about one year, you should be able to have the following successful results on your side:

  1. All “small” customers that have been handled by the inside sales team have been qualified and the data quality conforms to what you had in mind.
  2. The churn rate, meaning the customer loss rate within this customer segment, has reduced to a value that is customary in the market.
  3. The processed small customer group has been integrated into new potential clusters based on the qualification, by means of which you recognise customers that might need management by the outside sales force.
  4. You have reached a sales increase in the group and these sales have been achieved with better contribution margins than in the traditional large customer business.
  5. Your market share in this customer segment is higher than your market share in the overall market.
  6. The inside sales team that primarily manages the group by telephone has amortised its costs very quickly on its own with the additional contribution margins.

Introduction of an active small customer management: What do I have to pay attention to?

When introducing and operating the active small customer management by means of an active sales contact centre or inside sales team that actively promotes sales, several critical factor of success must be considered:

  1. Your outside sales force must be on board.

    For this purpose, it is important on the one hand that each customer is attributed both to an outside sales representative as well as to an inside sales employee. On the other hand, you have to make the outside sales representative understand that inside sales does not “take away customers” but supports him or her. The high-quality resource of the outside sales force should be used only for correspondingly qualified customers.
  2. You need transparency at all times.

    You need processes and systems that deliver at all times transparent information about the current status at the customer including sales information to you as well as to the outside sales representative or the inside sales employee respectively responsible for the customer. You should establish reporting that keeps this information ready for you.
  3. Before then, calculate the ROI.

    Before the project start, check your individual business case or let yourself be helped by an external sales service provider for this purpose. In the process, consider the situation and challenges of your company and B2B sales and also go through different variants if applicable.
  4. Estimate the potential of your small customers correctly.

    Initially ensure that your customers are well segmented and that you have identified your small customers have correctly. Then consider which customer groups are homogenous in this segment, which potentials they harbour and how the target groups should be managed.
  5. Consider potential channel conflicts.

    Online, distribution, direct, retail: Different channels require different approaches. Be aware of them and avoid potential overlaps with your team.
  6. Define processes and overlapping points.

    To manage the small customer segment profitably, outside sales force and inside sales need to work hand in hand. For this purpose, it must be defined even more clearly than before who does what when and with what objective or where this information is stored, etc.
  7. Install a project manager.

    The introduction of active sales small customer management is complex. It is advisable therefore to install a project manager for this, who has experience in the implementation and successful operation of inside sales projects. It has proven successful in the past to make the project manager commit to clearly defined targets.

Small customer management: Do it yourself or outsource it?

Active, systematic small customer management that is laid out to cover the entire sales region and which is to work profitably as an inside sales team or active sales contact centre that actively promotes sales can generally be realised internally as well as externally. Here are some pointers for your decision:

Manage small customers internally

If you are entertaining the thought of organising an inside sales team internally, you need to consider the following points:

  • Your outside sales force will try to use the employees for itself like office staff
  • You will need a project manager at any rate, who will be responsible 100% for implementation and operation. He or she should have experience with inside sales projects, as the control and management of the employees is generally different from traditional outside sales force management or conventional, reactive office staff on the other hand.
  • Your CRM database must be laid out sustainably for operations or sales so that you can create the relevant sales processes and reporting there.
  • Depending on the setup, you may potentially require the cooperation of the outside sales representative. Ensure that the outside sales representative understands the added value of the inside sales team. Otherwise, he or she will see the employees as “competitors” and work against them as the case may be.

External small customer management

The following advantages speak in favour of an external service provider instead:

  • You profit from the comprehensive know-how and many years of experience of the service provider. This means: You are ready to go quicker and will see results faster because the time for implementation until peak performance will be shorter than in the case of an internal solution.
  • Moreover, the service provider will know how to avoid the typical sources of error. Based on its best practice approach, the service provider transfers well-functioning processes established from other customers or from other industries to the sales questions presented to it.
  • The recruiting process and the selection of the “right” employees are crucial to success. Your service provider will detect specifically which candidates have the “sales gene” and match the sought profile for the revenue-oriented small customer management in inside sales. By contracting them, you have direct access to your partner’s employee pool.
  • The costs for the training and advanced training of the sales staff is also borne by your service provider
  • The service provider is focused to 100%
  • The service provider ensures that the entries in the CRM are accurate and up to date every day.

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If you would like to know more about the introduction of a profitable small customer management at your sales organisation or if you are looking for support, you are welcome to contact us.



Vertriebsleiter Gerd Kittlaus

Gerd Kittlaus

Vertriebsleiter
Vertrieb

Tel.: +49 911 6602 147
E-mail: gerd.kittlaus@suxxeed.de

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