Great news for consumers: You don’t have to buy the number #1 brand of outdoor power equipment in America from the 8,000 lb gorilla, because STIHL has 8,000 dealers to help and serve your needs.

See the work product that promotes this positioning.

Check out this important and rapidly growing sales and marketing opportunity at the latest TransPromo Summit.

“To gain a deep understanding of the needs and economic value of customers,
companies must analyze the size, service costs, and true profitability of deals, not just their gross margins.”

“Profiling” is hot topic these days in the general political scene, but when it comes to running a company, it is not taboo.  Properly profiling and discriminating customers is OK, especially if you want to get more money from the ones that will affect the top line.  Enjoy.

• Acquiring new customers 4.22
• Retaining customers 3.90
• Increase lifetime value 3.7

Note: The above statistics are based of an order of importance 1-5, with 5 being most important:

Remember, your best customer of yesterday may not be your best one tomorrow. To focus your limited resources in any economy, understand the economic impact your customers provide to your bottom line. This will reveal the more profitable ones from the liabilities. Then understand the gap of what you have to offer and what they want to buy. You may be surprised to learn the marketplace shift has been quite dramatic over the past six months. To learn more, read the executive guide, How to build a customer-driven enterprise.

First, the chart below demonstrates how to manage your customer’s.

The chart below outlines the process of customer centricity across all of the stages of the model.

The chartbelow shows how your customer attrition burdens the profitability of your best customers.

By segmenting your customer you can find who are your best customers, who are your worst and which customers will generate the most profitability for you in the future.

If that was not enough, this chart demonstrates the 80/20 rule in action. Your best customers create the majority of your profit.

It’s time to cut the fat, we can help.

The American Marketing Association changed their 20 year old definition of “marketing” in 2008:

Older Version:
“Marketing is a process of planning and executing the conception, pricing, promotion and distribution of goods, ideas and services to create an exchanges that satisfy individual and organizational goals.”

Newer Version (2004):
Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

Latest Version (2008):
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”

According to Nancy Costopulos, chief marketing officer of the American Marketing Association, “Marketing is no longer a function — it is an educational process.”

For the record, I am encouraged it took about 40 years to actually add the word customer into the definition in 2004.

With respect to the 2008 revision, the context from Ms. Costopulos follow-on quote is revealing. “Marketing is no longer a function” is the kiss of death. Body parts have functions; parents have functions, heck even the IRS has a function; but not marketing. It just kinda floats out there wandering around without purpose or a role. I’ll give her the benefit of the doubt but probably not a smart reference quote as CMOs are under scrutiny every day. By adding “society at large” along with context that marketing is an “educational process” is as close to getting fired based on fluff as I can think of. Lots of academic chit chat, white boarding and altruist on-campus atmosphere probably doesn’t arm CMOs what they need to live another day. I can imagine how the CEO of a company that is trying meet his/her business goals, thinks about this CMO’s chit chat:

“Well boss, things are going swimmingly well….my department is dysfunctional (contrary to the popular belief that all departments are functions) as I try and use shareholder’s money to educate the consumers why blue tinted bottled water is better than clear water. I suspect after about 4 years of our educational process, millions of dollars later, the consumer will “get it” and we will start to see some sales progress. Plus we helped’ society at large’.”

My advice? Stick close the customers and prospects that deliver the money, being the black ink; not the red kind. Or you may get “pinked”.

The chart to the left provides the holistic view of understanding how to manage your business, with your customer at the core. At Winsper, we call this model Customer-Driven Business Performance. It established a simple framework yet the implications can have a profound effect on properly organizing sales, marketing, product development, finance and operations centered around your customers.

The overall benefits for senior executives are:

• Analyze customer profitability to drive increased shareholder value.
• Segment customers using Life Stage Models.
• Identifying the customer conversion.
• Understanding Net Present Value.
• Eliminate customers destroying company profitability.
• Measure Total Cost of Customer AcquisitionTM
• Reorienting customer value propositions to
  increase customer satisfaction while reducing wasted costs.
• Focus company resources to measure, manage and optimize
  your customer revenue opportunity.

It starts with having a complete understanding of knowing your best customer from the perspective of value, revenue, profitability and advocacy. The chart below outlines the process of customer centricity across all of the stages of the model.

To read more about Customer Economics click here to download our fact sheet.

The fundamental evaluation of any new business opportunity, especially for a B2B direct sales model is the BANT model – Budget, Authority, Need and Timing. There a dozens of variations off this theme, from Sirius Decision to salesforce.com. But the fundamental model of BANT should come no surprise to any sales manager or for the guy in the trenches. Win on all 4 of these pistons, and the deal is sealed. Knowing how much time and effort it takes for a sales person to first get the suspect, then the prospect to ultimately reach the pinnacle of this scorecard can take dozens, if not hundreds, of man hours. Add it up. Let’s say there are a few staffers required to channel the suspect through the process, from in-house lead qualification to inside sales qualifiers who then pass it off the field sales representative. So, that’s three people all at various compensation schemes. Let’s do some simple math to illustrated a what if scenario (and by the way, this does not account for the marketing dollars spent to get the suspect to show up at the front stoop (you can read about Total Cost of Acquisition in another blog post):

Prospect A:

Step 1:

Lead Qualifier: 1 hour phone call, and 1 more minutes to send “more information” – these prospects usually are classified as “seemore”. They always want more information to help them justify their next move. Add 10 more minutes to put information into CRM or a marketing database. The Lead Qualifier notices the same prospect decided to join a recent webinar posting, download a demo and one white paper. Not much to do here because the in-house marketing database works so well, it automatically tracks the user’s behavior and adds information into the unique ID of the prospect.

Hourly cost, including benefits, direct costs: estimated $100 dollars

Step 2:

In-house sales rep: tries 6 times to get the prospect on the phone through a variety of means, writing emails and voicemails, sends a personal note, a timely article and finally gets to spend 1 hour doing a deeper dive Web Ex presentation. After 2 months of chasing the suspect, the in-house sales rep eventually marks the opportunity as Level 2 prospect.

Hourly cost, including benefits, direct costs: $400 dollars

Step 3:

Just a mere 3 more phases to go before they become a Level 5 prospect, when there is a contract issued and much anticipation for a purchase order. Whew, the boulder is finally moving uphill. So the appointment is made, the sales rep flys out and does the dog and pony. Works the room at and after the meeting, spends exorbitant amount of time building presentation decks, internal IT for proof of concept model, plus using internal finance and legal support to review T&Cs, so on and so on. Chalk this up as great sales day and let the bell ring.

Hourly cost, including benefits, direct costs: $5000 dollars

T&E cost: $600

Estimated Total Cost for Sales Process (not including marketing support): $6,100.

Year One Contract amount: $30,000.

Job well done, right? Well you don’t know yet. While one would immediately think the cost of sale is about 20% of the revenue and that may be a fair assessment at face value. But the more important questions is if this customer actually going to drive the proper profitability for your company long term.

How do you know they will be a likely profitable customer before you expend all this company? It is quite simple. Evaluate your existing base of customers, identify which ones impact the most profitability, get a 360 view of them, and overlay that with your prospecting database. Pursue only the prospects that the same archetype and profile of your best customer. Forget the rest. A tough pill to swallow in a down economy, but only the ones with strong intestinal fortitude can say no to revenue at their door step.