Developing New Accounts
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Summary
New customers and more sales are
essential for profit and growth. The small business owner-manager
especially should have a specific program for regularly developing
new accounts. This publication presents a systematic approach to
finding, getting and keeping customers whose sales volume produces
profit for you.
Developing New Accounts
The problem of developing new accounts is a common one. A frequent
lament of sales managers is "We just don't have enough new accounts
to provide the volume we need." In most companies a five percent
improvement in sales volume will have a most favourable profit
effect. It will equal or exceed, for example, a comparable
percentage improvement in costs of material and services,
productivity, inventory management or control of receivables.
How to acquire the accounts to provide such added volume becomes a
matter of prime importance to survival and growth. In a great many
businesses, small and large, the matter of new customer acquisition
is approached in a haphazard, intermittent, unplanned and
uncoordinated way. The results are understandably often less than
satisfying, more expensive than expected, and generally inadequate
from the standpoint of contribution of profit.
Useful insight into the problem of getting new customers can be
obtained by considering the sales department as a purchasing
function, spending company resources by investing in customers and
sales volume. The controls, systems, thought and effort devoted to
finding the right source of materials, provide for the most
effective and evident management concern relative to its purchasing
activities. Disciplines are established and controls are in place to
measure supplier and purchasing effectiveness. Alternate bids are
secured and potential suppliers critically tested for quality and
service. Capital expenditures are closely evaluated. Yet the problem
of investing to get a new customer, one who is expected to deliver
profitable sales over an extended period of time, is often reduced
to a simple charge to the sales department of "more customers!"
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In most cases the investment in customer acquisition is heavy,
scattered, unmeasured and unplanned. The monies spent in this type
of effort consist of advertising dollars, sales salaries and
expenses, phones, samples, administrative time, and often expensive
engineering costs.
The alternative to the shotgun approach to customer or account
development is usually less expensive and substantially more
productive. It involves some straightforward initial analysis and
planning inexpensive enough for the smallest business. It may
likewise involve a change in attitude and emphasis that says that
the business of investing in a customer ought to be a selective,
investigative, consistent, and planned process, worthy of the
closest attention of the managing sales executive. Finding and
developing a worthwhile customer is a different objective from
simply "more sales" or "more accounts".
The procedure involves ten steps, formalized to the degree necessary
for the needs of the enterprise. These are:
- specify;
- quantify;
- identify;
- qualify;
- convince;
- service;
- collect;
- measure;
- expand;
- repeat.
The first seven are initially critical. A substantial account that
does not pay is no "customer".
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Specify
The first step is to decide what kind of customer is needed. This
involves a brief customer "specification". No one just buys steel or
a machine tool or a truck. The kind of steel, its characteristics,
its yield are matters of instant concern. Are we trying to buy a
simple drill press or a numerically controlled multiple spindle
processing unit? Does the truck have to carry one tonne or ten
tonnes, and what is to be hauled? Good analysis of the strengths or
deficiencies of your present customer accounts can help in preparing
your customer specification.
The Customer Specification Might Read: Must be within 100 miles.
Must be potentially capable of repeat purchases of product "x"
totaling $50 000 per year. Must appreciate value of services as
opposed to being strictly a price buyer. May be an intermittent
process operation where downtime is a critical concern. Frequent
changeovers. Quality conscious buyer. Pays promptly on terms.
Probably in the Standard Industrial Classification (SIC). May
currently be using product supplied by National or Atlas. Size
indicator: at least 100 employees, reasonable in-house maintenance
program, evidence of sales growth. Objective: profit contribution
rate of 30 percent.
Or the Specification Might Be Simply: Companies in the meat
processing industry, (beef, lamb, pork, fowl) engaged in slaughter
and/or portion pack, handling over 100 head/day equivalent;
Or: Independent distributors of products associated with the
material handling industry in major trading centers in the Prairie
region, having a sales force of no less than five, and carrying
recognized domestic truck brands calling on local industry,
particularly food processors. Must have repair facilities.
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Quantify
How many this quarter or this year? "To provide the type of business
required, two new accounts with volume potential of $50 000 each are
needed in each of the remaining quarters of the year, plus five new
smaller accounts in each quarter with a potential of $25 000 to $30
000 annually." Or, "Need an average of three new small machine
accounts in each territory, each quarter, with potential of supply
sales of $2 500 each per year following installation."
Comment: The new growth is admittedly a necessary consideration for
growth. Some businesses, however become so concerned with the new
account syndrome that they overlook the very real, often untapped,
potential of existing accounts. By proper attention to maintenance
selling, accounts on the books can be upgraded, expanded to new
applications, and in effect become new for all practical purposes.
The maintenance aspect of selling is often minimized because the
battle has been won - the customer is on the books. Neglect gives
your competitors the opportunity to develop a new account by taking
away one of your customers. In most cases, developing an existing
account is much less costly than acquiring a new one.
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Identify
Having specified and quantified the type and number of accounts
wanted, the next step is to identify and rough screen the most
likely candidates in the most direct and least expensive way.
A few days devoted to secondary research can prove rewarding. The
precise method depends on the scope of the project, the number of
required new accounts, and the geographic area involved.
For the smaller local business, the telephone directory is an
obvious, available, and well organized reference for new accounts.
In fact, a study of the directories for several cities provides a
fast, comprehensive, and specific source of information for the
significant trading centers in a region. Such listings display
products and services offered for sale, the nature of the services
offered (like wholesaling, retailing or manufacturing), the specific
location, phone, and postal code reference of various businesses. If
the listings are regarded as exact, with a little deduction, you
could determine what such businesses buy for resale or buy as
original equipment for their own use. For example:
Acme Rat Exterminating Products: Rentals, Service, Parts - Rat
Poison, Roach Spray, Ant Bait, Bird Repellent, Rat Guards, Animal
Traps, Chimney Screens, Sprayers (all types), Electric Fly and
Mosquito Killers, etc., including map, address, phone, and brands
handled.
Under "Mailing Lists" the yellow pages also give substantial listing
of sources who provide listings of various types, often very
specific as to Standard Industrial Classification (SIC) number,
address, and names of relevant contacts. Purchase of one or more
lists across the developed specification provides a fast way to be
selective.
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All things considered, like today's average cost of $75 - $100 for
an in-person industrial sales call, the time and money devoted to
even modest preplanning data research is well spent.
Lists that can be bought generally key on SIC numbers that,
depending on the number of classification digits, give names, size
indicators, etc.
Other useful and readily available secondary sources of names are
directories of associations, clubs, laboratories, manufacturers,
Chamber of Commerce releases, mail order catalogues, and the like.
The limit is only imposed by the extent of creative imagination of
the research. The various desks in the federal and local offices and
the public and university libraries are extremely helpful. Often
license, permit and registration data are available and useful.
A typical listing of forging users for example would include these
SIC numbers: 3623, 3624, 3629, 3711, 3713 and 3714. Each listing
would look like this:
| Data |
SIC Number |
Area Code |
Telephone Number |
|
Company Name |
|
|
|
Street Address |
|
|
|
City, State |
Postal Code |
|
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Qualify
One of the better sources of new accounts among existing users of a
product or service is your direct or indirect competitor.
Examination of the sales literature, catalogues and trade releases
of a competitor often reveals a pattern of distribution, a listing
of good reference accounts, and often the details of best
applications. Review of competitive advertising likewise points up
many useful areas of concentration, selling methods, and coverage of
what competitors regard to be their major markets.
Placing yourself in the role of a buyer of your own product or
service is useful in identifying a competitor's influence points,
likely user references, other applications that might not have
occurred to you. Your own representatives can be helpful. In other
words, shop around for your own product and see who else touches end
users in the distribution process. Each is a potential source of
useful information. A frank discussion with some of your good
customers will produce names of their competitors who might become
your customers as well. Even on a limited basis such efforts are
most rewarding.
Your purchasing agent can be a most useful source of qualifying
information because the agent talks to sales reps who talk to your
competitors. In the field of selling, detailed attention to your
competitors' activities can be as equally rewarding as attention to
your own customers from the standpoint of identifying new customer
opportunities, advantages, deficiencies and needs. The cost is
reasonable - an open ear.
When the list is reasonable - identified, broadly qualified and
manageable the personal contact or specific qualification phase
begins. This takes time, but the effort will be spent on a modest
group of targets that have been screened against your broad
specification, qualified roughly at minimum cost and have a high
probability of productivity.
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Good mailing lists tied to selected group targets can help identify
new accounts. By a proper offering (i.e., to conduct a free survey,
to provide a sample, to solve a specific problem, to offer a study
result, to provide a modest prize for best new applications, etc.) a
user response can be obtained. From these responses you can qualify
the potential of prospective new accounts.
Learning more about your end users can also uncover buyer habits and
identify characteristics indicative of a larger group. For instance,
return warranty or registration cards could give you this
information from comments or answers to a few basic questions about
the product by users. This information can be matched to a larger
group, expanding your viewpoint.
Look also for customers among users of alternative products or
services to yours. For example, users of plastics are currently
converting to die cast for various reasons. Gray iron castings can
often be converted stamped parts or forgings. Automobile buyers are
acquiring motor bikes and supermarket shoppers are buying less at
the store and eating out more at fast food restaurants. Such habits
may bring back some lost customers or make you vulnerable to
pressures from indirect competition.
Convincing a potential user to try your product or service is
the next step after you have found and qualified your prospects.
This step is the pay off for all your efforts and investment to
attract qualified customers. Convincing the potential user to try
your product or service is often similar to qualifying customers
according to your specifications.
You search in a specific market area for customers that are stable
companies with solid needs for your products or services. They will
do repeat business and pay their bills. And you are able to come to
terms and do business with them.
Keeping customers involves giving service, getting paid, measuring
account profitability, expanding customer buying, and then repeating
all the steps to get and to keep good customer accounts.
Remember, treat old customers the way you service new ones and you
may not need so many new ones.
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The Profit Evaluation
How did you do against the measure you set out for yourself? Is the
trend better? Are your new customers delivering the quality of
volume that you want? Tracking your progress is very important.
Let's say you were shooting for no increase in fixed costs and
$70,000 more profit contribution on the bottom line from new
accounts.
Chart your actual results: |
