Let’s Look at Where You are Now Before We Assess Where You’re Going.
We believe that all companies are not the same. We built our own company with the kind of values and responses that we think we would want to have if we were our own customers. In software, honestly, it’s not hard to be better than average or even superb. Most software companies run on a ticket / help desk system that strands the average customer-caller in a loop of uncertainty with prompts and dead ends. Reaching someone that can actually help you with your issue is rare. For us, putting a live person on the end of every call, not a help desk, but someone who can actually help you helps us to raise our Net Promoter Score (NPS) – see yesterday’s blog for information on that – and beat all of our competitors for service.
So, now we turn the tables.
If not all companies are the same and not all vendors are the same, it stands to reason that not all customers are either. In the coming weeks, we’ll dig into this a little deeper when we consider activity-based costing, but for now, let’s just take a first pass. It’s easy to give a customer a grade. Actually, it’s fairly easy to have an opinion based on the most recent interactions that you’ve had with them or historically, what you remember.
How correct are you?
First, look to your revenue. Create a line item for each customer that you have, individually by site or account or group. How much revenue did they provide you last year? How about the prior four years? A rolling five-year total is a good understanding as well as looking at trends – is it increasing or decreasing?
Dig a little deeper into the information. Use a spreadsheet to take your monthly income from each customer and track it. When you get 12 months of data, add the total and divide by 12, giving you the monthly average spend. Now continue on until you have a rolling 12-month (R12) monthly average spend. Plot this on a graph and note inflection points. An inflection point in an R12 number is significant because it signals that the amount that customer is spending, overall, is decreasing. It removes single data points and hunches from the calculation. Inflection points are critical to pay attention to and can very simply answer the question what kind of customer is this on a revenue scale?
What about average percentage of overall revenue? Do you have one or two customers that contribute the bulk of your revenue? This puts you at real risk for that customer increasing their power of you (remember the buyer power we talked about last week?) and is a risk that can be mitigated.
If you feel exposed with one or more customers, there are tools that you can use to lower the risk that you carry keeping them on board. Try to get these customers on multi-year contracts or ask them to pay in advance for your services. Locking a high-revenue, high-risk customer into contracts that tie you together for a longer period of time will help to drive down the chances that they will leave you.
Next week, we’ll continue this conversation around customer prioritization before we dig into how you service them and the differentiator that that presents.
In 2020, we are rolling out meaningful tools for manufacturers that are affordable, on-target and competitive. We are also expanding our educational offerings.
We believe in the critical importance of manufacturing right here in North America and we work hard to keep you working. Ask us questions; you will find that we are far more reachable than other software providers you may partner with. We are here to help you find the right tools and use them, whether it's a Google doc, an Excel sheet or a Production Control system. To learn more about meeting your targets for 2020 or just getting a question answered, visit us at www.cimx.com.