Customer Analysis Helps You Grow Your Business in Good and Bad Economies

Customer analysis is important in any business climate. Even in good times, most businesses want more sales. In a weakened economy, the challenge to increase sales can be daunting. Companies should implement a solid system for evaluating their customers to help improve the sales process.

Why is customer analysis important for increasing sales?

Businesses typically find that 20% of their customers bring in 80% of their revenue. I call this the “A-list”. Identify the characteristics of your “A-list” and you can increase sales.

Once you clearly define this target group, you can target your most aggressive marketing and sales campaigns effectively. Also, by defining your “A-list”, you can create a more productive customer retention strategy.

You should never just assume you know all there is to know about your customers. If you don’t ask the right questions, you may not get the information you really need.

Moreover, your customers’ needs change; so, you should keep a steady eye on what they currently want. One way to monitor customers’ changing needs is with regular surveys with a tool such as formstack.

Tips for Reviewing Your B2B Customer Base
To start the customer analysis process, carefully review your existing business customers. You can use the following steps:

1. Get a list of all of your customers for the last three to five years.

2. Set up a spread sheet with a listing of your customers followed by four columns (total sales, profit margin, product mix, hassle factor, growth factor)

3. Rank the customers by sales.

4. Identify the customers that represent 80% of your total sales, your “A-list”.

5. For as many customers as possible (especially the A-list), gather the following information:

• The profit margin for each customer on a scale of 1 to 5, with 1= poor profit margin and 5=highest profit margin
• The set of services and/or products each customer purchased from your company.

c. Have your customer support and sales teams rank each customer on how they rate each customer’s:

• “hassle factor” How hard is the customer to please on scale of 1 to 5 (with 1 = hard to please and 5 = easy top lease)?
• sales growth potential Does the team believe this customer will buy more or less in the future on a scale of 1 to 5 (with 1=declining sales potential and 5=exceptional sales growth potential?

6. If you have completed step-5 for all customers, you can break your entire customer list into three groups:

• The coveted A-list, customers in the group generating 80% of your revenue, scoring4 to 5 on the “easy-to-please” scale, scoring 4 or 5 on the growth potential scale and buying products or services with the best margins.
• The C-list, customers in the group generating the bottom 30% of your revenue. Pay particular attention to customers in this group that also rank below 3 on“easy-to-please” and on growth potential. These may be customers that are not worth keeping, if you can capture more A-list customers to replace them.
• The B-list customers fall in the middle, generating between 30% and 50% of your revenue.

How to Use Your Customer Analysis

You can use this information to develop a very useful description of your best customers.

Carefully Review you’re A-list customers.

Ask your sales and service teams to create a profile of the common traits of these customers. What do they buy? Where are they located? How do they structure their business? What does their buying process look like? How did you first find these customers (what is the source of the initial lead)?

Get data about your A-list customers from businesses databases providers such as Dunn & Bradstreet.These providers will give you information on total revenue, NAICS or SIC codes,etc. for a specific company.

Develop an ideal A-list customer profile, including descriptors such as number of employees, total revenues, location, NAICS, lead source, needs etc..

Consider buying a list of companies with profiles that match your A-list profile from a resource such as infoUSA.

To this list of top A-list prospects launch your more aggressive sales and marketing efforts to find more customers in existing markets, just like your “best”.

Carefully review your C-list customers. What can you do to improve the profitability of this group? What can you do to reduce their “hassle factor”? If your team thinks it can grow sales, try to increase your business with them. Do not spend too much time with this group of customers, especially if you see no up-side potential. If your team sees no potential for improving the situation, you could increase your prices to them to make it worthwhile to continue to sell to them.

Your best strategy is to concentrate on the A-list and B-list customers and prospects that match those profiles.

Tips for Reviewing Your Consumer Customer Base

You should develop a listing of customers by revenue, using a process similar to the one described above for business customers.

For your best customers, you can ask them to complete a survey. Or, if you have the address of your best customers, you can use the Claritas system in the US to get an idea of the demographics of your best customers.

Here’s a fun test. Visit this link ,enter your own zip code and you can see how Claritas defines you community.

The Claritas system will give some general ideas about the demographics of the customers you serve (such as age, life-style, income, etc.). A similar system is available in the UK from CACI.

After you have a profile of your best A-list consumer customers, you can use that profile to acquire new customers.

With solid customer analysis, you have a much better picture of your business and a clearer path to growing the business.