Six Sigma Sales – Ranking Customers
On-Target Sales Strategy / Six Sigma Sales
We hope you find value from our examples of Lean Six Sigma at work. Due to the difficult economic environment many organizations face, we will spend the next few months looking at the application of Lean Six Sigma to Sales Strategy, or what we call On-Target Sales Strategy, and how we helped clients grow Sales and Profit.
The On-Target Sales Strategy has three thrusts:
- Leveraging data to base sales strategy decisions on reality
- Sales productivity
- Strategy execution and accountability
Problem
This organization, featured in last month’s newsletter (to review this newsletter goto www.supplyvelocity.com and click the “Archive Newsletter” link on the right side of the homepage) is an in-house manufacturing division of a larger residential construction company. They grew very rapidly from a large, single account with a multi-year order, and were spun off as a separate company. When the large multi-year order ended, sales dropped precipitously. The overhead costs in equipment and manufacturing space quickly created a loss situation.
After developing the Performance Measurement System, we quickly turned to growing sales and improving sales productivity. All sales metrics were in the “unacceptable” zone. This included revenue, close rate ($ won / $ bid), gross profit and repeat orders.
Tools
On-Target™ Sales Strategy
Details – Customer Ranking
1) Using the Sales Performance Scorecard we sorted all customers by each measure. These measures included sales, gross profit %, close rate and number of orders for the last 24 months. (see the “Performance Data by Customer” tab)
Note: We do not share actual client-data. I have created example data for this Newsletter
2) Then the customers were mathematically ranked by these measures and sorted into three Customer Groupings (see the “X-Y Matrix” tab):
- Green = Top 12 Customers
- Yellow = Middle
- Red = Bottom 8 Customers
3) We created specific account strategies for the top 12 (only 7 shown in the example) including identifying influencers, decision-makers, approvers and end users. We worked on a “touch” system to ensure they were in front of these various people. They are also working to get these people into their production facility to show off their Lean processes (more on this subject later).
4) They spoke with the bottom 8 and discussed why they were being asked to bid their work, if the chances of winning were almost non-existent. I don’t believe in the term “firing customers” but everyone deserves to earn a profit from all customers. If this is not possible then there is no basis for this economic relationship.
Impact on People
1) Most people in the company eagerly embraced this more targeted sales and marketing strategy.
2) Estimators love it because they don’t waste their time creating bids for companies that don’t buy. Operations likes working with customers that they can get to know better.
3) However, a couple of the sales representatives, who used more of a scatter-prospecting approach, could not adjust. They were not able to switch to building relationships with their top accounts and were not focused in their selling. They continued to go after the large bids, for new customers, even though we proved we were not succeeding at these. So they were let go, in favor of more relationship-focused sales representatives.
Results & Summary
1) They now have an ongoing customer-classification system, so they can focus their attention and service on their best customers
2) Within two months the backlog grew by 60%. Close rate improved by 25%.
We hope this Real World Lean Six Sigma case study gives you ideas to improve Sales Execution and achieve Operational Excellence.