The customer database: :
A compass for new clients
Mike Collins
If you're committed to finding new customers or markets, or expanding
your market share, then a well-designed customer database is an absolute
necessity.
In 1999, the company I was a general manager at was in the midst of a
five-year turnaround, where growth was mandated by the owners. I was
committed to all three of the above goals, as well as doubling the size
of two divisions.
The database I had inherited was typical of most manufacturers'
databases. It included the following information:
A well-designed customer database is an absolute necessity |
1. Customer and contact names.
2. Location (addresses of decision-makers and phone numbers).
3. Sales information (revenue by customer and product type).
This kind of simple database wasn't going to give me the information
I needed to profile the best customers, explore new markets, develop new
products, or create new sales channels. All were primary goals of the
five-year plan.
Instead of buying an expensive and generic CRM software program I
decided to design my own, using a spreadsheet that would generate the
specific data we needed to market custom machinery.
I used Excel because everyone in the division used it. In addition, I
wanted the employees to be the designers so we could make our own
changes and not depend on outsiders or software codes.
The whole project was completed in one weekend. The time and money
spent in developing the new database was repaid many times over, both in
terms of additional sales and competitive advantage.
Here are some tips for getting your own customer database project
launched:
1. Make sure one person is assigned the responsibility of maintaining
and collecting all customer database information.
2. Make the whole effort of gathering the right customer information
cheap and easy. The objective is to keep the database simple and
economical.
3. Design your own. Following my example above, use a spreadsheet or
a simple database program. I like spreadsheets because they have a lot
of power, are easy to use, and can be changed and updated by
non-programming people.
4. Allow the sales staff the opportunity to design and test the new
database. Do not let programmers, accountants, or engineers get
involved, or the project will turn into a programming extravaganza.
5. Make it a point to ensure maintenance of the database is as
important as processing orders.
6. In the event information gaps exist, hire a telemarketing firm to
call each customer and obtain the missing details.
Step 1: Define the headings you will
need.
By establishing the correct headings and using pivot tables, you can
easily design a customer database that can be used immediately. The
following are the exact headings I used to develop our new database in
the above example, along with descriptions for each:
* Sales order number. Almost everyone assigns some kind of number to
each order.
* Company name and location. A complete address can also be added,
but it is important to at least have the name, city, and state, because
you will want tables that sort sales and model data by state and
customer.
* Sales territory. Assign a code to each sales rep, distributor, or
factory salesperson, so you or your client can analyze the sales and
profit of each sales channel. These codes are useful when they are
connected to sales, product, or profit summaries to show performance in
an individual territory.
* Company size code. The size of the customer company, in terms of
employees and revenues, is important information, since companies of
different sizes require different sales and marketing strategies to
reach. Size, in terms of employees, is also used to target accounts and
to purchase prospect lists. Use the following as a guide:
1. Very small plant with 25 to 50 employees.
2. Plant with 50 to 500 employees.
3. Customer with many plants in the U.S. and 500 to 5,000 employees.
4. Multinational company with plants all over the world and 5,000 to
100,000 employees.
* Customer type code. To simplify data input, develop a set of codes
to describe the various types of customers-e.g. MVC (most valuable
customers), OEM (original equipment manufacturer), F500 (Fortune 500
company), MU (midsize user), RE (reseller), SU (small user), etc.
Different types of companies require different selling and sales
channel strategies. For example, agents might handle small customers,
while large companies might require a national account team.
* Most valuable customers (the aforementioned MVCs). Research has
repeatedly shown 20 percent of a company's customers generally account
for 80 percent of sales. Analyzing these customers in terms of indirect
costs and gross profits will reveal the most valuable customers, those
who must be retained because they are vital to the growth and
profitability of the company.
Alternately, it may also reveal MVCs who have poor margins and are
hurting the company's bottom line.
* Customers' products. If your client is selling to other
manufacturers, it is important to know what products they manufacture.
Knowing their specific products will allow you and your client to assign
NAICS or SIC codes to the customer and find more customers exactly like
them. Which leads us to...
* National Standard Industrial Classification (NAICS) codes.
Published by the federal government, these codes classify all products
and services. They replaced the earlier Standard Industrial
Classification (SIC) codes in 1997. NAICS codes can be found online at
www.census.gov/epdc/www/naics.html.
NAICS and SIC codes can be used to generate targeted mailing lists
and prospect lists, as well as to determine market size and sales
potential. They can also be used to identify customer groups or market
niches.
* Model or job. This heading can represent a specific model, a
product line, a type of job, a service, or an application. The heading
must be customized to fit your business. However you describe your
products or services is usually shown in the heading of quotations and
can be a simple code or a complex description.
This heading (or headings) will allow you to sort products and
services by sales territory, product line, profitability, and a host of
other useful ways.
* Total sales dollars booked. This is the total dollars booked on a
specific order or job. This total dollar figure might be as simple as a
price list item or as complicated as a complete production line.
* Estimated margin. If you do estimates of costs on each proposal or
quotation, it's helpful to keep track of the estimated costs so you can
compare it with actual cost after the job is finished. This is a very
good way to check and see if the prices are competitive and the pricing
system is valid.
* Actual margin. This is the actual margin after the job is complete.
Most small manufacturers have good sales records but rarely keep
summaries of profitability. Maintaining detailed records on profit by
customer account, product line, and even product model will help your
client make customer selection decisions, change selling strategies, and
identify product dogs that should be dropped.
* Booked date and year. This is the date when the order was formally
received (not necessarily the date when the order is handed over to the
production system). Sometimes the order is booked based on a simple
purchase order number, and sometimes companies do not officially book
the order unless the hard copy of the contract is received.
* Estimated ship date and year. This is the date confirmed to the
customer when the contract and all order information is received.
* Actual ship date. This is the date when the order actually leaves
the plant.
* Span time. The difference between the booked date and the ship date
is the span time of the order, and is useful in predicting lead times.
* On time. This is the difference (in days) between the date shipment
was promised and the actual shipment. This data is used to calculate the
percentage of on-time shipments.
* Reason for lost orders. You need to develop your own code for lost
orders, but here's a sample: price (P), couldn't meet specifications
(SP), lead time (LT), sales rep (SR), superior competitor product (SCP),
and unknown (?).
* Commission paid. The amount of commission and the date paid is well
worth tracking, because this is a useful administrative tool to keep the
outsides salespeople informed.
Also, commissions are a large part of the cost of sales, and knowing
the total amount of commissions paid versus the success of salespeople
in completing all of the sales tasks is valuable and strategic
information.
Step 2: Review the benefits-and
tables.
Begin by defining the pivot tables of information that will help you
in both finding new customers and markets and tracking performance. Give
careful thought to what you think you need to know and why the
information will help you. If the benefit does not exceed the cost, do
not do it.
Besides the benefits described under each of the column headings here
are some additional benefits for using this type of customer database.
* Sales trends.
* Product trends.
* Tracking profitability.
*Sales summaries by territory.
* Sales summary by rep or distributor.
* Tracking lost orders.
*Tracking customer defection/retention rate.
* Tracking growth of customer accounts.
*Tracking MVCs by sales/profits.
*MVC profiles for prospecting.
*Determining market niches by SIC, type, and size.
*Tracking profitability of product lines.
*Determining product dogs.salesandmarketing.com |