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Common Questions and Answers
In a communist country virtually everyone is treated the same. Unfortunately, many sales reps take the same approach and treat all of their customers equally. They spend about the same amount of time with each customer, show them the same products, and make the same recommendations.
If you study your territory you will find that you have three types of customers. A small percentage (roughly 20 percent) of your customers will account for the majority of your sales and profits. These customers are your high-revenue, high-profit accounts; we’ll call them your A accounts. You will also have a group of low revenue, low profit customers (approximately 20-25 percent). These are your C customers. And, lastly, you will have a collection of accounts that generate good revenue although not as much as you would like. These can be classified as B clients.
So, if you look at these categories, where should you invest your time? For the best results, you need to invest your time with the small group of high-revenue customers and here’s why.
Your low-revenue customers may generate a great deal of your revenue but they also cost you money in time and margins. Most customers who fall into this category complain about price, do not see the value in your products or services, and demand concessions on a regular basis. As a result, they erode your margins and profits. They also frequently contact you with problems and take up your time dealing with small, inconsequential issues. These calls and situations take you away from and prevent you from investing more time with your high-profit, high-revenue customers, your A accounts.
It is easy to fall prey to thinking that spending more time with the large group of customers in the middle (your B customers) will dramatically affect your revenues. However, the problem with this thinking is that is the vast majority of these customers will not buy more from you. A small number, perhaps twenty percent, do have some high potential. You can determine which of your accounts falls into this category.
Many sales people fall into the trap of spending time with the customers they like or with whom they connect. While this approach may feel good, it is seldom the most effective, and in today’s harsh economic climate, you need to invest your time with your high-quality customers. Here is what you need do to in order to achieve this.
Block eighty percent of your selling schedule for the top twenty percent of your accounts.
“What? Spend most of time with only few of my customers? What about everyone else?”
You see, although your low-revenue, low-profit customers tend to be more demanding than your A customers, many of their concerns, problems, or pressing issues tend to be reactionary. That means they often call you with a problem that they could solve themselves but they have grown accustomed to picking up the telephone or sending you an email every time every time they have a problem. In many cases, you return their call only to discover that they have resolved the issue. This not only wastes your time, it takes your attention away from other high-revenue sales opportunities.
One of my clients analyzed their sales figures and discovered that more than 80 percent of their revenues were generated by fewer than 20 percent of their customers. They strategically choose to improve their service and visibility with this group of accounts. They didn’t ignore their other customers but they did reduce contact with them. Not only did their sales increase their cost to attain each sale dropped which pushed more profit dollars to the bottom line.
This is not an easy transition for most people to make because they get trapped into believing that they must service every account equally. But, if you look at hotels, airlines, and other businesses, you often find that the top-tier customers receive preferential treatment. Shouldn’t it be the same in your business?
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