“There are no longer any regular customers,” the owner of a traditional shop in downtown Landshut told me recently. And another specialty shop closes. This can happen to any company when markets change, their own products are no longer competitive, customers drop out or competitors constantly nibble at their own customer base. You should therefore cherish and care for your regular customers like treasures. Because they are the treasures of a company because they guarantee the continued existence of the business.
Maintaining existing customers is more cost-effective than acquiring new customers: right or wrong?
It is not without reason that marketing gurus postulate again and again that it is five to eight times more expensive to acquire new customers than to keep regular customers. However, caution should be exercised with this sentence. The conclusion is not to focus all activities on existing customer care. Because a “natural decline” in the customer base is unavoidable. That’s why it’s so crucial to constantly “replenish” the sales funnel . However, the primary goal of a sales strategy should be to satisfy regular customers and to constantly improve the quality of the customer base .
What are regular customers?
In terms of ERP or commercial accounting, regular customers are customers who are anchored in the commercial system with a customer number. This means that a strategic decision must be made as to when an existing customer who is no longer buying is not deleted for legal reasons, but is nevertheless removed from the active customer base. This will not be an issue if the customer goes out of business or goes bankrupt. This raises the following questions: After how many months or years without sales do special sales measures start? After how many years of unsuccessful efforts or with which indicators of a lack of chance is the customer no longer counted as a regular customer? After all, it makes no sense to encourage a proliferation of dead files in the customer base.
Therefore, we recommend having CRM set a warning parameter for regular customers in sales control who have not ordered for x months and monitoring this critical customer segment.
Existing customer segmentation as the basis for the sales strategy
This consideration leads to the following question: All regular customers symbolically form a file box with customer cards. Does it make sense that all index cards have the same color? Or does it not make much more sense to differentiate certain customer groups by color in order to see at a glance how the color components are distributed in the index box? Without reading an index card, you then know what kind of basic customer type you have in front of you. The question is which customers can be distinguished by color, so to speak – keyword strategic customer segmentation. Of course, a user can always filter regular customers in CRM according to industry, payment history or customer size. However, we also recommend pre-sorting (pre-qualification) according to strategic customer types – the colors for the customer cards.
The basic segmentation of the customer base should be based on strategic customer types or business models or core processes. After all, an industrial company has to be looked after in a fundamentally different way than a trading partner who sells on for a manufacturer. A supplier of fire protection devices carries out the following basic segmentation in the customer base – implemented in the CRM by a central customer parameter, so that this customer segment can be accessed directly at the push of a button:
- Fire brigades and other fire protection institutions
- System customers : commercial customers who have the entire fire protection service offered.
- Commercial customers : commercial customers who purchase products and / or services.
- Sales partners: Commercial customers (trading and service partners) who resell the products to end customers.
- VP private customers : private end customers who do not buy directly and who purchase through sales partners. If these are known (from marketing campaigns, open house days, guarantee cases, etc.), they are linked to the sales partners.
- Private customers : private end customers who buy directly.
- Indirect customers : opinion leaders, fire brigades, mayors, etc., who are active as opinion leaders and recommenders and are primarily looked after by marketing.
There are great advantages for sales management if transparency is created in the customer base right from the start. Sales strategy and marketing can observe and influence the intrinsic value and development of these strategic customer segments in a differentiated manner.
The secret of prioritizing existing customers
Different customer potentials, the self-image of customers and above all the always limited sales resources lead to the bitter practical realization: not all customers are kings. But the salesperson must be able to determine the rules of the game as to which customers are sensibly crowned kings. We are back on the topic of customer evaluation for the purpose of customer prioritization. Based on the qualification of leads, existing customers could be evaluated according to the following parameters, for example:
- Sales class: assignment of the regular customer to a sales class; eg differentiated according to 5 groups: 5 = top turnover, 1 = small turnover
- Profit class: assignment of the regular customer to a DB class; Eg differentiated according to 5 groups: 5 = top profit maker, 1 = loss maker
- Potential class: Classification of the still free (attainable) potential on a scale from 5 = very high to 1 = very low
- Classification of customer satisfaction , customer loyalty or the willingness of the regular customer to work in partnership with the supplier. Example: very good = 5 points: The customer makes an effort to visit the sales staff, is very interested in advice, likes to attend supplier events.
Poor = 1 point: We know that the customer is tied to a competitor and only uses us for offers to get an alternative offer.
- Product competence of the regular customer: Very good = 5 points: The customer knows our products and the technology behind them inside out. Poor = 1 point: The customer understands nothing at all about our product, so that it is difficult for us to convey product advantages even when advising.
- Strategic importance of the regular customer: Also to be evaluated according to a scoring classification.
Don’t underestimate the importance of evaluation
These six exemplary qualification parameters show how important it is to deal with the strategic consequences of customer evaluation. Example here: the potential assessment. In the present formulation, the potential class parameter will mean that customers whose delivery potential has been exhausted (low free potential) lose importance due to the point deduction. Customers with a lower turnover class, but with still high untapped potential, gain priority and could overtake these typical “star customers” in terms of importance. To put it another way: A strategy aimed at securing existing customers (farming strategy) evaluates overall potential; a strategy focused on conquest (hunting strategy) evaluates free potential.
Strategy: growth through optimization of the delivery share
How can sales growth be achieved with existing customers? Many companies assume succinct sales increases in the customer base without getting a picture of the possible opportunities. Different strategies are necessary depending on the objective of optimizing the delivery share:
Strategy 1: You grow with the customer, so you benefit from their positive economic development. That is the ideal case. Customer satisfaction and customer loyalty are the prerequisites. In this case, it makes sense to document the economic situation and development of customers and to parameterize them professionally in CRM.
Strategy 2: From a sales point of view, growth through a joint development of new potential (additional sales) on the basis of WIN-WIN relationships is to be evaluated in a similarly positive manner. You invest together. As in the first case, the supplier can grow without having to squeeze out competitors.
Strategy 3: The third strategy is classic cut-throat competition. You grow by increasing your supply share at the expense of your competitors. It should be noted that this does not happen at the expense of the price and thus the contribution margin. Imagine a customer offers additional orders on the condition that the price for the total quantity is reduced. Then it may be that the “purchase” of supplier parts becomes an economic boomerang. This is how the salesman becomes a businessman. This dilemma can be avoided with new, competitively superior products and services.
A sensible sales strategy can only be pursued if the known or estimated delivery shares of regular customers are documented in CRM. Market shares in the relevant markets can then be estimated using the supply shares. We consider the observation and control of delivery parts for defined regular customers to be a basic task of sales.
Strategy: Growth through up-selling and cross-selling
I would like to point out up-selling and cross-selling as special forms of sales growth in the customer base:
The motto for up-selling is: no customer is so bad that he cannot order more. A Mercedes C-Class driver could be routed to the E-Class. A family planning to buy a new kitchen in the mid-range price range might also want to buy a higher-end kitchen if the sales pitches are handled wisely.
Cross-selling is about offering additional services that are meaningfully related to the current ones, but are not actually part of your own range of services . A bicycle dealer offers cycle tours or arranges them. A window manufacturer recognizes that a customer’s front door is in need of renovation and provides a corresponding offer for a new front door. Alliances among providers play a major role here. Car dealers have car insurance, loan offers or merchandising items on offer.
The question is how up- and cross-selling opportunities can be taken into account in sales management. The following methods are common:
Buffet method : With a manageable range of possible additional services, tick boxes are used to document the product areas in which sales should follow up, i.e. which cross-selling products could be of interest to the customer.
Code number method : The degree of product range coverage of the customer is shown in CRM. For customers who use cross-selling offers below a certain threshold, the system issues warning messages for office and field staff.
Classification method : This method further develops the index method for marketing campaigns. Customers are segmented into categories based on cross-selling opportunities that have already been exploited. So you don’t work with numbers (key figures), but directly with prioritization. Example: A customer with more than 90 percent exhaustion of the range is listed as a CS top customer and is looked after accordingly. The sales department can probably assume that new additional products will also quickly meet with interest from this customer. On the other hand, there will be customers who are completely resistant to additional offers. You should just know them, your customers!
Alert method : This method makes sense if only sporadic cross-selling offers come into consideration. Example: If a customer buys new patio furniture, the system immediately sends a message to sales that the need for a new awning or a conservatory is also queried.
Up-selling is the responsibility of all customer-facing staff.
The task of sales is to convey the added value to the customer that he would receive with a higher-quality product. In any case, up- and cross-selling can only work if you know the customer’s quality and budget expectations. If a customer is interested in a PV system and is already at his personal limit with 15,000 euros, then it makes no sense to offer him storage for 8,000 euros. But the vision of an expansion of his plant must be conveyed to him.
Existing customer management concerns everyone
All sales strategies and methods presented are based on one finding: the quality and value of the customer base can be influenced. Anyone who knows their customers very well usually still has opportunities for significant increases in sales. You can’t do that on demand, not with forms, not with Excel and certainly not with the ERP. The appropriate instruments regarding transparency, process control and controlling must be available. CRM provides the basis for this.
Maintaining existing customers means supporting regular customers in both good and bad times. Sales cannot do this alone. Operational silos have no place here. Sales, marketing, development and service must see each other as life partners for regular customers. The market belongs to those who take good care of regular customers.