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What would you do if you discovered that over 82% of your
customers bought from you only two times----ever?
What if you discovered that for every 1,000 new customers
acquired every year, less than 300 would do business in the following year and after 4
years less than 150 would still be doing business with you?
What would you do if 60-80% of your top 100 customers
changed every year?
What would you do if after several years, only 15 of your
top 100 customers were still in your top 100?
Most of us would panic! Those cynics on the sidelines would
call for new sales management! Many of us would think that these companies are failing.
These were the customer buying patterns we discovered for
several of our clients; organizations who by most measures were tremendously successful.
One was growing more than 40% per year. The other two were growing more than 25% per year.
Two were share leaders for their market segments and all were very profitable. These
records of success masked problems with their customer base. Problems that, over the long
term, could substantially reduce their growth and success.
The management teams of each of these companies did not
think that they had a problem until we conducted our Customer Knowledge
Assessment . With the assessment, we were able to determine these companies
were under-performing. The traditional measures of success were masking the fact that they
were not building and retaining a loyal customer base.
Success Masks Under-Performance
Most sales organizations tend to have very simple measures
of success: growth in revenue, share and profitability; making quota or target. Some
organizations track product lines, others add key account sales and there are others, but
most measures of sales performance are very simple, as they should be. In most
organizations, until there are problems, little attention is paid to understanding the
fundamentals underlying their growth. With each of the examples of very successful
companies cited above, significantly better results could have been achieved by
understanding the fundamentals of their customer base.
When we asked one company about the performance of their
top 100 customers, they proudly stated that it had consistently tracked at about 40-45% of
total revenue and that they measured the performance regularly. When we looked at the
data, their top 100 did drive revenue; the problem was that every year it was a different
Another company was rightfully proud of their ability to
generate new customers. Their lead generation statistics were awesome! When we tracked
each customer, we found the majority purchased once and never again. Our client was
unaware that they were spending enormous sums of money to acquire a customer making a
In another case, we discovered that by increasing customer
retention, we could increase sales growth by 200%! This organization had been ecstatic
with 40% annual growth!
Dont let your current success mask the fact that you
may be under-performing your potential. It only takes a little time to gain insight about
your customers and their buying patterns. Understanding the underlying detail of who your
customers are takes only a little time yet can provide the foundation for solid sales
Assessing Customer Performance
To begin to understand who your customers are and their
buying patterns, you need to ask yourself some simple questions:
What customers represent my top 100?
What is the churn of those 100 over the past 5 years?
What is the trend in annual sales for each of those
How many new customers do we acquire every year?
What is their buying pattern over several years?
What is our customer retention rate? How many customers do I
lose every year?
How many times do my customers purchase from us each year?
Why do they buy from us? What value do we deliver?
When they stop buying, where do they go for solutions?
The answers to these are the start of understanding if you
have an opportunity to grow your relationships and sales with your customers. Spending
half a day to analyze basic trends is all this takes.
Determining your customer-buying behavior is just the
start. If you begin to see results like those cited at the top of the article, alarm bells
should start ringing. Seeing enormous customer churn, or identifying that many of your
customers are buying only a small number of times, or determining that their purchases are
declining dramatically, may indicate you have problems. Solving these problems can drive
tremendous sales growth.
The problems could be varied and complex. Are your
customers dissatisfied with your products? Are you satisfying their needs? Who are they
turning to for solutions? Have you lost touch with your customers? Are your sales people
maintaining contact? Are you directing all your communications to acquiring new customers
and not growing current customers? Are your customers aware of new products that can
satisfy their needs? Is your competition outperforming you in satisfying your customer
In the case of the examples above, by identifying the
customer buying trends, we not only determined our clients had problems, but we could also
identify specific customers to interview to determine the underlying causes for the
customer attrition. We could then systematically solve the problems and begin building a
loyal repeat customer base.
Make Customer Knowledge Part Of Your Early Warning
Traditional measures of sales success provide insufficient
indicators in whether you are achieving your true potential. Understanding what the
performance of each customer, over the life of your relationship is essential to
maximizing your performance. Systematically tracking new customer acquisition, customer
loss, customer churn can keep you ahead of the game, retaining and growing your customer
base and your sales.
Tracking the performance of each customer through the life
of your relationship with that customer is a key to maximizing your performance.
Customer Knowledge Assessment is a
proprietary tool used to help organizations understand the performance trends of each
customer. It provides management summaries to identify problems and maximize performance.
For further information, contact Partners In EXCELLENCE, (949)305-7146.
Partners In EXCELLENCE
provides many training programs addressing customer focus, value
generation and related areas. For information on the
Dimensions Of EXCELLENCE training programs, follow the
© 1997 Partners In EXCELLENCE. All rights reserved.
Dave Brock is President of Partners In EXCELLENCE, a
consulting and training firm. Partners In EXCELLENCE assists its clients in re-inventing
their sales and marketing organizations. Its mission is to have a profound impact in
improving the quality of its clients' sales and marketing processes.
Partners In EXCELLENCE supports a diverse clientele ranging from Fortune 50 through
start-up companies. These clients are in a variety of industries including: consumer
products, computer hardware and software, telecommunications, industrial controls,
scientific instrumentation, semiconductor and electronic components.