Do You Really Know Your Customers?

By Jennifer Anaya

Nothing – not even low price – trumps relationships when it comes to winning and keeping business customers. This is not just wishful thinking. I hear it often, including in words of wisdom from a CIO who spoke at CompTIA’s recent annual member meeting. It’s good advice for solutions providers to take to heart, especially as they shift to selling cloud, digital and managed services that customers can’t see or touch.

Don’t set it and forget it, or your customers may forget about you. Instead, pay extra attention to relationships — what you mean to them, and what they mean to you.{ad}

And don’t just depend on longevity of relationships. If you’re like most solutions providers, your average customer has been with you for seven to 10 years, says The 2112 Group. Certainly, that’s enough time to get to know them, right?

Not unless you can answer these questions about each customer:

If you don’t know your customers quite as well as you thought, don’t sweat it. Instead, get to work using these simple tactics:

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Which Customers Are the Most Valuable?

Regardless of whether your company has hundreds or thousands of customers, the prospect of getting to know all of them intimately may be daunting. It’s important, then, to evaluate your entire customer base and find out which accounts are the most valuable so you can focus your attention there — and work on finding more customers like them.

If you’re like most solutions providers, you segment your customer base by revenue, investing the most time and attention to the big customers at the top of the pyramid that pay you the most money (see chart, above right). Below them is a second tier of companies that aren’t as big and don’t spend as much. You devote less time to working with them than your top customers.  At the bottom of the pyramid are your small or new customers, which understandably don’t get much attention since your resources are limited.

If this is the beginning and end of your analysis, you’re doing it wrong.

A more strategic way of segmenting your customer base is to focus on profitability. Instead of a pyramid, create a matrix with revenue on the Y-axis and contribution margin on the X-axis (see chart, above left). Go through this exercise; you may be surprised at …

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… where your customers land in the matrix. It will likely give you better guidance on where to focus time and energy.

The most profitable customers — and the ones you need to focus on — are those in the top right quadrant.  At the opposite bottom left quadrant are low-revenue and low-margin customers that you should either consider firing or create strategies (like charging more) to nudge them to the right side of the matrix.

Customers in the top left likely are generating a lot of revenue for you, but you might look at ways to reduce the costs of serving them, bundle in some profit-rich services or, again, just consider charging more. Those in the bottom right have the potential to be highly profitable if you can grow your wallet share with them.{ad}

Don’t stop there. Take a closer look at your most profitable customers in the top right quadrant. Who are they? What business or vertical are they in? Why are they more profitable than other customers? It may be that they align best with your company’s strengths as a solutions provider. Or, you may be able to deliver greater value to those who are willing to pay. Let your findings here guide future sales and marketing efforts.

Understanding your customers is key. At the micro level, it helps you develop those trusted relationships that are more vital than ever as customers raise concerns about security, privacy and reliability as they migrate to digital and cloud solutions. And, at the macro level, it can help you grow your business by optimizing where your team focuses resources.

Jennifer Anaya is vice president of marketing for Ingram Micro North America. In this role, she is responsible for directing the activities of Ingram Micro’s marketing organizations across the United States and Canada. With nearly two decades of marketing experience, 11 of which have been spent working with and for Ingram Micro, Anaya is regarded as one of the “Most Powerful Women in the IT Channel” by CRN Magazine. Her career accomplishments include leading the development of Ingram Micro’s Partner Smart brand and spearheading several strategic communications initiatives that included successfully launching the company’s award-winning Agency Ingram Micro (AIM).
LinkedIn: linkedin.com/in/jenniferbaieranaya
Twitter: @jenniferid8