Is sales all that matters?
Unfortunately sales dollars are sometimes the only measure used when B-to-B companies evaluate the value of their customers accounts. We all know there is more to a customer account than what they spend, but too often the information is just anecdotal and it is not factored in during budgeting, business reviews, and other functions where resource decisions are made.
Consider the "Three P's" as a better framework for considering the overall strategic value of a customer:
- Payoff - A financial measure is absolutely an important element to include. Sales or revenue is the most obvious, but many companies move beyond this to measure net revenue, profitability, or contribution. Just be sure it is not the only measure. We have all seen customers that are considered a "top" account that actually turn out to be a financial drain on the company.
- Potential - It is important to consider where the relationship with each customer account is headed. Key measures of potential might include the growth rate of the customer's own business, the degree of penetration across the customer's business units, and share of the customer's total spend. These measures can be developed from public information, customer feedback, or sales staff knowledge.
- Partnership - Business leaders realize the value of collaborative efforts with both their channel partners and direct customers. Partners help us design better relationships and better products. Partners also share financial risk and will often accept shortfalls as an opportunity for improvement, rather than an excuse to leave.
The Three Ps can be an important framework as part of your overall customer retention strategies. Once you evaluate your customer accounts using a more accurate framework, you can do a better job of allocating resources to better serve customers and grow your business.