In: Categories » Business » Ethics and presentation » Three Types of Account Classification
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Managing your account base is often a question of maintaining existing customers and finding new customers who are most likely to buy, then engaging your resources to maximize the opportunity. However, some accounts are more profitable than others and let's face it, profit drives your business. You must maximize your returns by satisfying the greatest number of profitable customers. Return can be measured in a number of ways: ROI (return on investment)—the amount of money and time spent on an account; ROE (return on energy)—energy expended to secure the account; ROO (return on occasion)—leads or referrals you get while golfing or participating at an occasion outside normal selling activities or selling hours. ROO extends your limited selling hours and ROT (return on your time equity)—asks how wisely are you spending your allotted time. Not all customers have the same buying potential. The portion of unprofitable accounts is usually greater than you think. I remind you of the 80/20 rule: 80% of your sales come from only 20% of your customers. Therefore, sales entrepreneurs need to classify customers on the basis of their sales potential, to avoid spending too much time with low-potential accounts. Remember, there are only 1,760 selling hours in one entire year. We can't afford to be busy servicing unproductive, unprofitable accounts. Don't be fooled by revenue numbers. Revenue alone doesn't keep a business afloat, profits do. Pricing your product or service at or below cost is not smart business, but many sales representatives are seduced into a quick sale where profit is sacrificed for revenue. Your business must be managed by utilizing all of the resources at your disposal, maximizing your return in the most productive manner. To that end I offer a very simple account classification strategy: the ABC analysis. It's not new but it certainly works. Use this method to evaluate and classify each of your existing and potential accounts. A AccountsYour A accounts deserve the most attention. Here's why:
B AccountsB accounts are not quite as attractive as your As, but certainly worth pursuing. Here's why:
C AccountsI fondly refer to a C account as "a pain in the asset." C accounts usually distract you from your A and B accounts, offering little or no return for your investment. Here's why:
These accounts are literally a pain. They whine about this and that, finding the darndest things to complain about. In spite of your efforts they are never satisfied. As you classify your accounts, I strongly recommend you continue to work closely with your As and Bs, and toss your Cs. That's right, get rid of them. With limited selling hours, you can't possibly maintain C accounts as well as service your As and Bs. Remember, C accounts are a major distraction to your core business accounts. By responding to or pursuing C accounts, your A/B accounts could inadvertently become a silver platter opportunity for your competitor. In most cases the neglect is unintentional but the consequences can be dire. This is a chief cause of lost customers. However, be aware of potential changes in account status. A C account today may become an A account tomorrow. Likewise a B today may become a C tomorrow, and so on. There is no universal grading system. An A or B account in your territory could well be a C in another territory. Each territory has its own unique account classification parameters. Here is a fact that may help guide your thinking as you manage and grow your account base. It costs your employer approximately $200 to $300 for every sales call you make (based on approximately one hour of actual selling time). Now let's add $200 for the customer's time and we have a $500 sales call. Not many salespeople think in terms of cost per sales call but as an entrepreneur, you must ask yourself, "Is this call worth $500?" It becomes clear that time with a C account is not only unproductive, but very costly. Once you have determined that an account has a C status, don't be too quick to abandon it. Four options are available.
Firing an account doesn't mean pursuing an unprofessional, unceremonious approach. It means engaging in an open, honest dialogue with your customer. It could be as simple as saying, "Although we have both explored the possibility of doing business together, it appears at this time we cannot move forward. I do thank you for considering us."You then suggest the customer research the market for other options. Appreciating how valuable your time is, your choice is simple. You can choose to work more and make less, or work less and make more. Another aspect to consider is to evaluate each opportunity within existing accounts. Evaluate and classify each opportunity based on its own merit. Don't throw out the baby with the bath water. For example, you may be presented with a C opportunity within an A account. Your options are to fulfil the C opportunity in the interest of the relationship, or to politely decline by explaining your reasons and perhaps suggesting an alternative. An effective strategy is when you and your customer agree to disagree. Rather than aggravating your customer by walking away from a C opportunity, it's preferable to openly discuss your reasons. Come to an agreement and that may be to disagree, all the while keeping the relationship intact. Parameters that flag a C account or C opportunities are as varied as customers themselves. Typical reasons include poor returns, they insist on a rock-bottom price, they are too demanding, you are unable to fulfil expectations, or they order lower-than-acceptable volumes. However, you may elect to pursue them for corporate or political reasons as the Head Office may deem the account prestigious or strategic to the business—one that looks great on the corporate résumé.
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