If you ask anyone who works at one of your locations to identify your "best" customers, they could probably spit a few names off the top of their heads. And they likely would be the customers they are most familiar with based upon them doing a lot of business with you.
But managers and salespeople know in their guts that revenue volume is not always a direct indication of the profitability of a customer. Because not all customers act the same. They usually have customized pricing structures based upon what they buy and how often. And the cost to serve each customer can vary greatly based upon their service needs, how they pay, returns. etc.
If all customers aren't the same, why do we treat them the same?
Most distributors treat all of their customers the same for a simple reason: they have developed a sales and service platform that doesn't include a way to stratify the most profitable customers. If there has been any stratification, it usually only looks at revenue or gross margin production. But what about customer loyalty and cost-to-serve? These metrics have traditionally only been done subjectively based upon the sales team's instincts.
John talks about his experience with Customer Stratification at SAP SAPPHIRE
(Click here to open video in a new window)
Data turned into actionable information beats intuition!
If you have invested in an ERP system, you know that you now have more data than ever about your customers. What if you could use that data and turn it into valuable information about your customers? What if you could stratify your customers and determine which are the most profitable, which are using your services and not paying for them, and which have the greatest potential for profitable growth? Your sales team could then apply strategies based upon that information to better utilize their selling time, by calling on the right customers and allowing them to drive home the value you deliver to your most profitable customers. Instead of using "best guess intuition", you would be leveraging information to uniquely approach your customers based upon objective criteria.
How do I stratify my customers?
The National Association of Wholesalers, in collaboration with Texas A&M, has published the groundbreaking research Customer Stratification: Best Practices for Boosting Profitability that provides the recipe for wholesale distributors to use their ERP data to stratify their customers. At StratMax, we endorse the utilization of this research to start your Customer Stratification journey. (No, we are not affiliated with NAW or Texas A&M, and we don't receive anything for our endorsement. We just believe in the research as a best practice.)
This research does a great job of not only showing you why you should stratify your customers, but it also gives you a step-by-step process for implementing the stratification. We have experience successfully implementing Customer Stratification based upon this research at a national distributor with over 200 locations. In addition, we have networked with dozens of distributors who are following this research to capture best practices and experiences. The key finding of this research is that distributors who pursue Customer Stratification are more profitable. We believe that every wholesale distributor should be using Customer Stratification to drive profitable growth and differentiate themselves from their competition.
Why would I need StratMax's help?
Most distributors don't have the available resources to work on a project of this scale full time. It takes a coordination of sales, operations, IT, marketing, financial, and logistic resources to create a comprehensive Customer Stratification model that can be successfully leveraged into actionable information. At StratMax, we know what it takes to build a successful model based upon the research. We can help organize your team and guide them through the step-by-step process. Even if you already have a team in place or have already built your model, we can still provide you with the best practices and shared experiences we have gathered from the distributors who have already successfully deployed Customer Stratification. With StratMax's support, you don't have to blaze a new trail. We can lead you toward those Customer Stratification strategies that we believe have proven to be the most successful in driving profitability.
I stratified my customers, now what?
You have used the data in your ERP system to turn it into information. Which is great. Unless it doesn't get utilized. The key to the successful implementation of Customer Stratification is the strategies that your sales team utilizes with this new information. Everyone in your organization needs to start thinking differently about how they interact with each customer based upon their stratification. At StratMax we have captured over 50 strategies that can be used with the Customer Stratification results to change the way you interact with your customers. It is all about time. Your salespeople only have so much selling time each day. Our strategies help your salespeople make the most of that time, doing the right things with the right customers while eliminating wasted time with unprofitable customers. And it can go beyond the sales team to everyone in your organization. The NAW research has shown that 10-20% of your customers can make up 80-90% of a wholesale distributor's profitability. Shouldn't everyone in your organization be treating your most profitable customers differently?
What Customer Stratification services does StratMax offer?
We offer a wide variety of services to support your Customer Stratification journey, depending on whether you are just getting started, have already started the process, or are well along the path and are looking to accelerate the work you have already done.
Development of your Customer Stratification model, based upon the NAW research, but customized to your ERP data and business needs
Review of your existing model to identify areas for improvement
Presentation of the fundamentals of Customer Stratification to your sales team
Complete rollout of your Customer Stratification information to your entire organization with a change management plan, strategies for each department, and presentations to gain acceptance and immediate traction
Sharing of best practice strategies that should be utilized by your sales team with this new information
Creation of custom strategies, based upon your Customer Stratification information, that are specific to your business
Integration of StratMax Sales Toolbox with your Customer Stratification information to increase your sales team's efficiency
Development of a Customer Stratification dashboard with drill-down capability, allowing the sales team to understand each factor that impacts a customer's stratification
Interactive coaching with your sales team to understand your Customer Stratification information, including development of the best plans and strategies for your customers
Joint sales calls with your sales team to show them how to effectively use this information to maximize their selling time each day and drive profitability
StratMax is uniquely qualified to help you analyze your data, turn it into valuable information, and develop the strategies that drive profitable growth. We customize our engagement with you to provide the optimal amount of support you need in your Customer Stratification journey.
How do we get started?
It is simple. Just contact us and let's talk about where you are with your Customer Stratification journey, where you want to go, and how we can help. Based upon our understanding of your needs, we will provide you with a proposal. If we can't help you, we will try to help you find someone that will.