Competing on price alone drives eroding profitability as margins are pushed to increasingly lower levels. Knowing your customers' definition of value and competing on that basis increases your status as a preferred supplier and helps stabilize the profit margin.
Finding your customers' unique needs provides a solid foundation for your company's growth and increased profitability. Whether you conduct a formal customer analysis or simply change the way you relate to customers on sales calls, you'll open the door for new suggestions and services that increase your value in customers' eyes.
Customer analysis is a review process in which you identify and categorize your customers into about three groups. The top tier includes customers whose projects are profitable and regularly scheduled, and whose work style meshes well with your business. The second tier covers clients whose projects are unpredictably scheduled or that ordinarily involve unrealistic expectations. The third tier comprises customers who are slow payers, who change specs after orders are quoted and placed, and those who only show up with last-minute needs.
Your best customers provide insight about unique needs that your company can fill. Scout the marketplace for new customers of similar size, profitability, business philosophy and product requirements. This is where the demand for your products and services is likely to be greatest. Don't neglect your second tier customer - but at the same time, don't focus your efforts on companies just like them. And look to your third tier, particularly the bottom 10 to 20 percent of your customer base, when you need to cut customers to free up capacity for more profitable efforts.
Also, remember that almost anyone in your company can be your eyes and ears when it comes to discovering a customer need that you can use to create a unique selling advantage. In particular, sales reps should ask questions about how customers use your products or what attributes are most important to them.
In addition, engineers and designers who go on sales calls with reps can deepen their knowledge of the ways products are being used and decisions are being made. They are likely to spot ways to solve a customer's problems as well as or better than your sales team alone. Also, by visiting customers, production managers may see how to provide better service, for example, by pacing delivery to actual usage rather than customary patterns to reduce the customer's inventory costs.
Then, don't underestimate the importance of your own relationship with customers' management. With the other pieces in place to determine and capitalize on demand, your relationship may make the difference that wins the business.
The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.