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.
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!
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.
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.
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.
Assumption per year: 4-6 customer visits per year are needed for a customer to “feel the management.”
* Costs without other sales costs (e.g. sales software costs, proportionate allowance of the annual salary of the sales director, etc.)
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:
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.
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.
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
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.
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.
A well-managed small customer group can be the backbone for difficult financial times!
After about one year, you should be able to have the following successful results on your side:
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:
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:
If you are entertaining the thought of organising an inside sales team internally, you need to consider the following points:
The following advantages speak in favour of an external service provider instead:
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.