by Dianna Brodine, managing editor
A Google search for “sales” turns up a lot of inspirational messages about serving the customer, but not much about making sure the customer serves your business. Yet, not every customer is the right customer. Sales staff are tasked with filling the sales funnel to ensure consistent revenue, but it’s also important to evaluate how the customer benefits the business after the initial order.
From asking for an increased business load to implementing price increases and … when necessary … exiting a customer, it takes a careful strategy to ensure customer relationships benefit both sides of the sales contract.
Here, Tom Wood, vice president of sales for E-S Plastic Products LLC, shares advice from his experiences in the plastics industry.
Asking customers for an increased business load
The hardest customer to get is a new customer, and the easiest customer to get is one you already have. Rather than expending resources into a long sales cycle that may or may not end with awarded work, why not ask existing customers to move a larger portion of their business into your care and keeping?
Wood: With existing customers, I want to have a candid discussion about where our relationship stands and where it’s going. Are we in a position of strength, or do we have vulnerabilities? It begins with asking what they spend in plastics. What percentage of that business is with my company? Where are we in their supply base? We want to grow in the percentage of their business that we produce, so we have to find out where we fit in terms of the volume we’re producing for every customer.
Other questions might include:
Can we participate in a vendor program?
What’s keeping you up at night right now?
What works with your existing suppliers – even those not doing what we do?
The answers to these questions help E-S Plastics to develop a plan that includes a sales target and a strategy to reach that target. I want to know how much potential is available for me to chase.
Implementing price increases
Every customer wants a lower price, and every one of your competitors wants to offer it. However, there comes a time when the price quoted for production no longer provides a profit.
Wood: There are three ways to communicate a price increase: make a phone call, send out a price increase letter or do it in person. But, if you do it over the phone or in writing, it becomes adversarial. Instead, I like to have a face-to-face meeting.
I’m passionate about making business make sense, so I use data to tell the story about the need. Has part volume decreased significantly? Have materials costs increased? Has pricing stayed consistent for a significant amount of time while all other associated costs have gone up? Since I’m using data to justify the increase, we look at each product individually – don’t hit the easy button! An across-the-board increase may not be needed.
Once I’m meeting with my customer, I show them the impact of the old price vs. the new price, and then I set an implementation date. In general, customers prefer not to move tools. If you can justify the changes you’re making for the good of your own business – and you have the relationship with the customer that you should have – you have more leverage than you think.
Exiting a customer
There comes a time when a customer is no longer the right fit for your business. This situation brings a host of emotions for both sides of the sales relationship, but a calm and professional exit strategy can ease the situation for all involved.
Wood: Once it’s determined that a customer no longer has growth potential, we explain the narrative to the customer – whether they no longer fit our business model, the margins weren’t profitable, etc. – and we try to have another supplier to recommend. We also consider the resources needed for the project – from the tool room to the quality department – so we can find all of the inserts, gauges, etc. We have even provided work instruction orders. We don’t want to burn any bridges, but it’s also important to make the right decisions for our company.
Over the last five years, E-S Plastics has simplified our business. We have a healthy, diversified customer base; we transitioned 20 customers out that weren’t fitting our current business model; and we’ve done price increases without losing business we didn’t want to lose.
Wood: Every sales plan is a combined plan – that’s the secret sauce. By engaging the customer, we get them to be “on our team.” Once we have that relationship, the customer is invested in helping us, just as we are invested in helping them. n