From the Lionesses of Africa Operations Dept
The lockdowns are starting to be reviewed and in some cases reversed, but have we been making full use of our time to prepare our businesses for when the doors open and life returns to some semblance of normality?
Here’s a little game to play to while away the last few days before we welcome back our staff to the ‘new normal’. The game is called: “Are they worth it?” and it is based upon calculating the value to your business of each client and each product.
“When you reopen your door,
you know which product to push,
and which to ignore.
Which customer to name your next child after
and which customer to leave on the floor!”
Yes, we know it’s not Shakespeare, but our Head of Finance was strangely rather proud of this little poem! So who is your best Customer? No - Wrong! Not the one who buys the most. It is all to do with who pays the highest per deal profit and is quicker to pay.
How do we produce an easy to see diagram of this?
List total sales by customer
List the total profit per customer
List the average days each customer takes to pay
(as you can see, it is the perfect job to do while still in lockdown because numbers 2 & 3 will take you a bit of time as most businesses do not have these numbers to hand, but from now on, you will!)
You will end up something like this:
So what now? Well, Julian and Dick are clearly problems, but if you lose them would it be the end of the world? They pay slow and you make little profit, yet at first look were close to the top of the list for number of sales. In these situations simply raise prices to them but give them an incentive such as a discount if they move to direct debits or if they pay below 20 days. If you lose them, believe us, it will not break your company.
Timmy, well he obviously has great taste as he is picking products you make great profit on, but is a terrible payer, so sit with him and discuss why this is. We have often found a personal discussion puts a face to the purchase experience and people often recognize they should pay quicker without having to offer discounts to encourage quicker payments (obviously if he doesn’t move having shared a coffee (er…or biscuit!) with you, then discounts for quicker payments are the way to go). Clearly a customer you don’t want to lose, but something has to be done about his lateness.
Georgina? Well, she is playing the game, she knows her market for your goods and has possibly recognised that in that particular product(s) you have priced yourself below your competition. She is buying low profit items, but is perfectly happy to pay early. Recognizing that it is this particular product(s) she wants, there is no point offering her the same items Timmy buys, but can you offer her the same products but with more bells and whistles, or with better support to encourage her to move up the profit scale and pay you more? This area is the most difficult to shift, so you may have to make a decision to simply keep her to move stock and keep that cash coming in at a good rate (in itself very valuable these days), …or lose her.
Last, but not least, is Anne. Of course as you can see there is still room for improvement, but please treat her with kid gloves, nice and soft, and certainly do not take her for granted. Give customers in this quartile preferential treatment, early sales on your new and latest catalogue, occasional bespoke deals just to show extra love. Who knows, it might encourage Timmy or Georgina to change their ways in order to go join Anne in the ‘Platinum Room’!
Next week, we look at your products and in advance, we apologize - that product that you love, that you have produced from day one, your signature product…it might just have to be thrown out for the good of your company going forward. You have been warned!
Stay safe.