Learn to Sell Only to Deserving Customers

What? What are deserving customers? I want to sell to everybody, don’t I? Well… do you?

Smith Manufacturing Company, one of your best customers, regularly buys from you and your company. They order pieces and parts yet seldom yield an opportunity to solve larger manufacturing, production or quality problems, choosing instead to call other companies for these services, some of which may be your competitors. They call frequently, requiring lots of assistance from your inside sales and shipping people. They seem to have many issues too, issues that frequently require your attention and those of your customer service department. They pay late, but they always pay eventually. They buy at a discount and you earn less profit than you should for an account of this type. You call on them regularly, socialize with their managers over lunch and an occasional dinner, and enjoy a good reputation throughout their firm. You may feel this is one of your key accounts.

Does this scenario sound familiar? Or… does it sound all too familiar? We all have them; customers that consume a great deal of our resources. We like them. We like their employees. We spend a great deal of time there. The burning question becomes: Can we honestly continue to justify our current or growing level of investment of our resources in this account?

Jones Medical is also one of your regular customers. Your business here is quite different than at Smith Manufacturing Company. Here, you provide solutions based upon your product mix and your years of experience. Your profit margins are considerably higher and their company pays your invoices promptly, taking advantage of any particular terms you may offer. Your communications with their personnel are typically over the phone or via email. You make quarterly calls on key personnel and may occasionally take a key official to lunch. They operate in a very professional manner causing your inside salespeople, customer service staff and shipping department few problems. Since you are in the business of providing solutions, you often miss their more generic storeroom business since your "pieces and parts" competitor is often there weekly checking bins and drawers for needed low-margin, price-sensitive replacements. You have become an important resource to many key players in this company and they reward you with opportunities to serve them.

Let’s compare both types of customer. In your mind, quickly review your existing customer base. What do you see? Are there more Smith of Jones types of companies? Where do you spend the bulk of your time and resources? Which customers bring more complaints to you from your inside service staff? Where does the bulk of your gross profit come from? Which companies generate more of your costs? What are your opportunity costs? These are tough questions requiring tough decisions.

Many of us will find that we have far more customers like the Smith Manufacturing Company while actually needing to cultivate more customers like Jones Medical. How does this happen to be? As human beings, we tend to get comfortable. In fact, over time, we tend to get so comfortable that we actually get stuck in a rut and tend to remain there. Salesmen have told me that they simply don’t have the necessary time to locate and develop more customers like Jones Medical. "It is the Smith’s that pay the bills" they often say. That may look true on the surface, but underneath, the Smith-type companies are actually putting a stranglehold on your sales and earnings, causing the salesperson to experience a somewhat stable or declining income level.

I have found that at some regular interval, it is healthy to review my accounts and determine where we actually invest our precious resources as well as reviewing how much time we actually spend looking for additional customers. What I have found is that we often need far fewer Smith-types and considerably more Jones-types. Our sales and profit growth is going to come from establishing more accounts like Jones Medical and weaning ourselves away from our accounts like Smith Manufacturing. So what are we to do about it? How can we accomplish this?

Often, there may be a junior salesperson or a particular inside salesperson in your company that could be re-assigned these accounts. You might continue to see these customers quarterly to maintain contact and then share the commissions with your inside staff. It may however, be in your best interest to completely shed responsibility for these accounts, thus handing-off these customers to someone else. Alternately, you may be able to locate a new partner, another local company who is interested in servicing your Smith Companies, thus divesting yourself of them altogether. Sometimes, "firing" your customer is the only reasonable alternative.

I have several ex-customers and prospective accounts that I choose not to do business with. That’s right… I choose. While the reasons vary, the common thread is that pursuing their business is not a wise use of my time or company resources. The net profit gained from my selling investments there simply will not justify pursuing or keeping these customers. I choose to allow a competitor to service them. If my competitors are consumed with servicing these Smith-type accounts, I have more opportunities and less competition in pursing additional Jones-type accounts. It really is that simple.

What is required of you is clarity and self-honesty in evaluating your market position and your customer mix and the ability to make the tough choices. Remember, it is your territory, and it is your earnings at stake. Use your time wisely, invest your resources carefully and choose customers that your company can afford to deal with in a profitable manner. This is truly the selling scenario where everyone wins.