Business Intelligence – Customer Optimization

Often companies rate their customers simply by revenue or unit volume and fail to recognize gross profit margin, maintenance cost and other strategic factors. This can result in an incorrect perception of which customers are the highest performers and most important to the company. Supply Velocity uses a new Business Intelligence System, Customer Optimization, and a new metric, the customer performance score (CPS), that allows evaluation of customers based on multiple criteria.

Supply Velocity works directly with your sales team and facilitates the Customer Optimization process so that the results are customized for your business.

Multiple criteria decision-making, applied to the customer valuation and resource-prioritizing problem, provides managers with a balanced approach to allocating resources to existing customers and prospects. By using multiple criteria that affect different functional departments, companies can align their sales, finance and supply chain functions. When the valuation is complete, companies can utilize this data in two ways. First, customers are ranked by the CPS and divided into tranches of importance, with customer service, field sales and customization efforts in operations prioritized to the highest performing customers. Second, the CPS rank is compared to the traditional sales, gross profit or unit-volume rank to help identify which customers need remediation in key customer performance metrics such as paying-on-time, order size, profit margin or other metrics. This model is easily customizable to many different types of companies and industries.

Supply Velocity works directly with your sales team and facilitates the Customer Optimization process so that the results are customized for your business. The first question a company must answer, when trying to optimize customer performance, is, “what is a high performing customer?” Historically, companies evaluate customers by revenue so we lead the team through a new process to better understand other critically important factors such as:

• Annual total gross profit
• Paying quickly (as measured by average days to pay invoices)
• Average revenue per delivered order
• Acquisition cost
• Year over year percentage growth in revenue
• Gross margin percentage
• Strategic importance

The specific steps of Customer Optimization include:

• Create a cross functional team from sales, marketing, finance, operations and supply chain
• Determine the criteria that define great customer performance
• Weigh the criteria
• Calculate the Customer Performance Score
• Rank and classify customers based on the CPS
• Create resource allocation strategies based on customer classification
  • Inside versus outside sales representation
  • Annual value-review meetings
  • Ability to create or customize new products
  • Emergency ordering
• Create customer performance scorecards and work with the sales force to create account-by-account customer performance improvement plans

For more information, visit our website for a white paper on this method.  You can also email me at: ray@supplyvelocity.com.