In most companies, long-tailed desert customers – small and low-profit customers, often tens of thousands – have surprisingly important hidden profit opportunities. The key to success is to integrate these customers into profitability and development capacity and to develop an appropriate management plan for each department.
Profit Desert customers are an important part of most companies. They usually hold 50-80% of customers and 40-60% of the company’s expenses. In some companies, state agents are classified as low-income “C” labels, which prevents agents from selling more profitable business. In all companies, these customers are often inexperienced, creating costly complexities in everything from ordering to completion to after-sales service and return.
The best way to manage your for-profit customers is to gather under one management structure – a for-profit customer base – rather than being scattered throughout the company’s sales representatives portfolios. This group should consist of specialized sales and marketing managers focused solely on this customer segment. These managers must control all of the following steps in the profit margin customer management process.
Micro-target your profit desert
Enterprise Profit ManagementThe marketing standard provides a framework that uses for-profit analytics, subdivisions of profit margins, and the creation of an appropriate management plan for each segment. We have defined these transaction level profit margins Previous HBR articles. When companies use these metrics (creating a comprehensive P&L for each billing line), they quickly see that their customers are falling into three broad profit categories.
- Profit margins – High-income, high-profit customers (especially about 20% of their 150% profit-generating customers)
- Excess drains – High-income, low-profit customers (typically 30% of their customers lose 50% of these profits)
- Extra deserts – Their low-income, low-profit customers
Profit Desert customers generally make a small profit, recent analysis shows that some of these customers are really profitable importers, while others make huge profits. Although individual customers make only small profits or incur small losses, the overall impact is significant because there are so many customers in each department. With the capabilities of micro-targeting and digital systems, these profitable desert customer segments are highly manageable. However, they need a very different approach to management than the big and the small The tip of the iceberg And Excessive discharge Customers.
The following figure shows the profit margins and profits of a typical company. Each category is divided into profit-based quartets (in terms of net profit, respectively, with the same number of customers in each quarter).
Each The tip of the iceberg The customer base has about 2,800 customers, making a net profit of $ 189 million. On the contrary, each of them Extra desert Quartz has 62,000 customers, with a total profit of $ 25 million.
Extra customers make a profit of $ 5,000 to $ 44,000 per customer, while desert customers make a loss of $ 900 to $ 600 per customer.
There are significant profit margins among profitable desert quartz.
- The high-profit Desert quarter made a strong $ 58 million profit, with a profit of $ 900 per customer.
- The top four profit is only $ 5 million, which is not good for one customer.
- The minimum quarter will result in a loss of $ 1 million.
- The bottom line is a $ 37 million loss, with only $ 600 per customer.
This figure shows that 1) profitable desert customers need a very low cost business model, taking into account the difference in profit performance between their surplus customers (or their surplus customers) and 2) profit margin quartz. , The business model should be more diverse. These are the two cornerstones of making a profit in your desert.
Vary your business model
The most important way to identify a business model for your for-profit desert customers is to focus your digital transformation initiative on this group. It is important to have a website with an e-order, but it is not enough. It is important to automate the entire Desert Customer shopping cycle.
Effective Profit Desert Customers Introductions have a comprehensive set of skills including:
- Pricing and promotions – Pricing and promotional skills that can be targeted at customers in certain for-profit desert quartz.
- Product Search – A catalog with advanced search capabilities and optional storage units (SKUs) in the product (e.g. safety 12 packaged safety glasses), displayed in order of net profitability.
- Product selection – Customer reviews, filled with questions and answers from customers and the company.
- Product order – Known, easy-to-use e-commerce capabilities are added to sales and marketing comments created by machine learning algorithms. When a product is not available or at a later order, successors must provide suggestions.
- Product monitoring – Product installation process notifications or postings.
- Management responds – A system that examines the customer’s return or retention of the product. The company must monitor the extent and nature of the response to identify potential deficiencies in both the customer’s return policy and strategic defects in the sales or product support process.
Target your profitability measures
Each profit quarter is different from the others, and each needs a different profit improvement program.
High Quarter Profit Desert Tags
This customer group as a whole is significantly profitable, but engaging each customer individually is not economical. The first step is to profile each client to see potential candidates. The main candidates are small, fast-growing companies and large companies with a small share of costs.
Once you have identified these major promises, you can examine their buyer behavior by sending surveys or asking for telex calls. One particularly discerning distributor used monitoring calls to determine if they were primarily looking for growth opportunities.
- Low prices
- Extensive placements
- Fast service
- Technical assistance
In the first call, the telecom agent’s representative verified the account’s capacity and reviewed the buyer’s behavior. The account was then transferred to a separate “boarding” telex group in one or another category of buyer behavior.
Similarly, by using surveys, you can build the remaining accounts for your profitable desert customers based on the buyer behavior profile and buyer behavior categories based on buyer behavior categories.
In addition, the Profit Desert Customer Group should regularly meet with selected top four customers to explore opportunities to create product enhancements and extended products (specific products and services that meet specific customer needs). For example, a car repair company recognizes that repair shops need instructions on how to install the brakes. Along with this information they added a section to their website, and sales increased.
Once a customer group has created high-profile desert customer profiles, they can use them as a basis for new high-level accounts. For example, an intelligent retailer decides that the most profitable customers are sent by friends and family. The company has developed a successful marketing program around this, featuring events such as nightclubs and family wine and cheese parties.
Lower quarter profit desert labels
The purpose of managing these customers is to return at least a small profit or not to continue working with them (at compensation).
A major distributor was shocked to learn that more than 80% of the company’s profit margins were in the profit margins, with the largest share of these being the low-margin portfolio.
The company has strengthened its policy for the bottom four in several steps:
- There are no discounts or coupons.
- Minimum order amount to avoid additional charges
- There is no free shipping (the company has provided free shipping to competing customers and has also implemented the policy to the fourth profit desert accounts)
- No free auxiliary services (eg, acceleration)
- Reimbursement fee
The company has extended the order cycle for these customers, so if the local distribution center is low, they can get it from a filling warehouse.
Sales representatives are allowed to lift these restrictions, but the company is monitoring these cancellations carefully and holding its agents accountable. (Note that these measures have been improved for the top four customers with growth prospects.)
In this process it is important to consider the value of the account life. For example, a customer, such as a shopkeeper, may have legitimate occasional interests. When the client has a specific project, the profit may be high for a few years, then next year it will be among the projects with smaller purchases (and then return to the higher profit level). It is reasonable to expect that the “extra” earned by the customer in the high profit year will be extended over the year of the minimum purchase, and this should be taken into account.
Upper and lower quarter profit desert customers
These customers use large amounts of resources and make small profits, if any.
The first step is to explore these clients with potential growth in profit margins, either internally or with you. These clients should be included in a high-capacity, high-end customer development program.
The upper and lower quadrant desert customers are good candidates for finding and selling opportunities using machine learning algorithms. However, in order to increase the cost of service, you must meet this requirement in steps similar to the program described below.
Profit Desert Management Team needs to regularly check on these customers to find out if there are any new or emerging needs or innovations that can be met profitably by surveying, emailing or calling.
Profit Desert clients are many and varied, but they have significant hidden profits to contribute. The key to success is to deploy an independent, high-capacity desert management team using the company’s profit management metrics to create the best profit opportunities, and to create highly focused programs that bring your hidden profits to the bottom line.