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|  |  Customer Penetration October 30, 2008 NOPA INDUSTRY REPORT By Neil Saviano Two questions commonly asked by office products dealers are: “What process should we use to build a new customer’s business after we get the first order”? Or “what process should we use to build existing customer business”. These questions generally arise after either a successful prospecting process has culminated in an opening order, or current customer business is just not building. Both dilemmas relate to marketing’s concept of “customer penetration”. The new and current customer dilemmas include the following: Most first orders are low margin loss leaders products. Unless the opening order is leveraged to create future orders that will result in customer penetration and sales of higher margin non loss leader products, long-term new customer profitability is in doubt. Many current customers’ business is sporadic with no process in place to maximize penetration. The key to new (and current) customer penetration is to have a structured process in place. Unfortunately, structure has not been the norm for most dealers. Most recognize the need to build a customer’s business, and they implement various well-intended follow up programs. Arrays of wholesaler and/or buying group promotional materials are used, but mostly in unstructured sequences that lack strategically timed customer touches. It’s tantamount to “hit and miss” at best. Also lacking is a system for measuring the effectiveness of a penetration program. Structured customer penetration programs need to be built around CRM (Customer Relationship Management) software that is linked to popular dealer management systems. This software combination is used to store both demographic as well as business history information into the CRM package. Once stored, this information offers a snapshot of the level of penetration being achieved. A snapshot should include demographic information such as a customer’s number of white-collar workers multiplied by an estimated annual usage factor to determine a customer’s annual buying potential. The potential is matched against business history to determine a customer classification based on the level of penetration being achieved. Classifications become the basis for creating customer groups – the groups are attached to structured penetration strategies. Popular CRM software packages, such as GoldMine, are very effective in implementing structured penetration strategies. Consider the following example: Historical information shows that a group of customers are buying little if any jan/san or computer supplies. They are classified as “NJC”, and subsequently are placed into a sequential process of promotional touches (fax, mail or e-mail) interspersed with phone calls or appointments by sales people. A key CRM software feature called “Automated Processes” carries out this scenario. The well-intended follow up programs sighted above are carried out automatically, devoid of the inconsistencies that plague manual unstructured attempts. The scenario above is only one example of a penetration process. Another example could be the following: Subsequent to a first order from a new customer, the customer is placed on an automated process and is immediately immersed in information from other product areas such as jan/san, printing, toners, paper shredders, furniture, etc. The process is similar to the one described above pertaining to sequential events being carried out. An added benefit from a software-based penetration strategy is the built in sales person accountability. All process events can be coded and automatically posted to call reports, providing a synopsis of not only the events being carried out but the effectiveness of the calls and appointments as well. There is no doubt that customer penetration is at the core of dealer profitability. The low margin / loss leader model sighted above to gain new customers is of little value unless leveraged to create future high margin business. At the same time underachieving current customers represent much lost opportunity unless they are constantly analyzed for their profitability and buying status. Subsequently their status should determine a follow up program and technology must be at the center of the effort. The automated process scenarios described above need not be the only software-based penetration strategies. Customer information used properly provides many penetration opportunities if used effectively. Consider the following example: A customer is listed as a wholesaler of air conditioners. The sales person has noted (in the CRM software) that the customer has a sales force. This information, if used properly by the sales person, presents an opportunity to sell A/V supplies for sales meetings, or binding equipment and binding supplies for the customer’s presentations to their customers. This scenario not only results in higher margin non-commodity sales, but also has the spin off effect of enhancing customer relationships by providing a “one source” vendor. In these days of high-cost ordering and less time for buyers to seek out additional vendors, a “once source” vendor can save a customer time and money and escalate their relationship with a vendor. CRM software-based strategies must be at the forefront of dealer customer penetration programs. Customer information must be used constantly to identify higher margin sales opportunities and subsequently turned into automated or semi automated processes for structured follow up. Importantly, each customer’s buying status must provide a snapshot of where a dealer is with a customer’s penetration and where a dealer wants to take him or her. As Don Peppers and Martha Rogers so aptly described in an excerpt from their best seller, “The One To One Future”: “Marketers are rethinking the task of selling, visualizing it in terms of share of customer rather than share of market”.
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