 CRM: Who are your most profitable customers?Published Date: 2008-09-02 16:30:02 WorkOnInternet.com
Depending on the size of your customer base, you can decide on how many you wish to select. For this example, we will look at the top 5. Without a proper CRM system, this is going to be quite difficult to calculate. If you had an automated system, this would be one of the Key Performance Indicators (KPI) that you would always be looking at. Let's start by looking at your biggest spenders. You will need to calculate exactly how much profit you get from each of them. You will need to apply some simple accounting rules in relation to fixed and variable costs. To calculate your fixed costs, look at all the items that you spend money on every year. Things like; rent, light, telephone, salary costs, etc. When you have the total, then divide that by the amount of customers you have, and that is the amount you will assign as the fixed cost to each customer. Now look at the variable costs. This will be made up of cost of goods sold to each. Items such as; material costs, variable manufacturing costs, sales commissions, lead generation costs, service costs, etc. Now apply this to each of your largest customers. So how much does profit does each generate? Do the same with your 5 smallest customers and the 5 customers in the middle of the revenue ranking. Have you noticed any interesting trends? Is the percentage of profit consistent? Are the largest customers still your most profitable ones? If like many businesses at this stage, you have not got any clear cut answers, you will need to perform this exercise for your whole base. OK, let's assume for now that you have finally identified your most profitable customers. You will now need to look at what they have in common. Some suggested commonalities might be as follows: * They are all in the same industry * They have the same size * You have a specific sales or service representative looking after them * They are all in the same area * They buy a specific set of products Whatever the answer you come up with, you now will have the secret to multiplying your profits. Do the following and guarantee that your profits will increase exponentially. * Spend the most time with them, love them to death * Cross sell to other customers, those products which your most profitable customers buy. * Focus your lead generation efforts on prospects with similar characteristics * Ask each one of them for two referrals, after all, since they are giving you so much profit, they must be happy! There are many other things you can do to boost your profits with this sort of information, so my key tip to you, is ensure that you get some automated system in place which can answer these questions. What is more, you will guarantee that you repeat success and avoid costly mistakes. This article is one of many sales and marketing articles written by Peter Lawless of http://www.3r.ie - Marketing Consultant delivering Marketing Strategy & Online Marketing, Sales Trainer, and Public Speaker.
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