It’s amazing what you discover if you analyse your sales situation before you develop your marketing plan.
A recent client who is a major player in the industrial services sector began his brief by saying one major branch was showing a dramatic fall-off in sales due to tough trading conditions in a sluggish market which was being vigorously attacked by the opposition.
The branch in question showed a sales platform like this:
The sudden fall was attributed to difficult market conditions and competition. But when we analysed the sales we found:
1. The number of active customers had fallen year-by-year:
Yet industry had an on-going need for what our client did! While a few services were postponable, most of the needs were there year-by-year.
2. Then we discovered the top 10 customers accounted for:
3. And the next group of major customers showed:
Further analysis showed that the F94 growth in this group was due to two one-off contracts totalling $646,000 or 24 per cent of sales. Exclude them and the sales pattern became one of continuous decline:
Thus the branch’s situation changed from an apparently dramatic fall-off in sales in the last year to a continual decline over three years.
We now re-examined sales to the top 10 customers on this adjusted basis and found they accounted for:
This gave a pretty clear indication that the branch was more and more concentrating on major customers to the exclusion of all others. Confirmation of this was the figures for the smaller customers:
Their number and importance were declining year-by-year in what really was a stable market for our client’s essential services.
Marketing action
Our solution was to:
- Hire a competent technical sales person.
- Develop a customer database using ACT! customer manager software.
- Enter all current and former clients into the database.
- Use Australia on Disc to sort by ANSIC codes a universe of potential customers. This was then examined to produce a primary list of potential customers. These were then re-arranged geographically and the salesman drove past each one to make a rough estimate of whether they were worth pursuing or not.
- The final list plus the old customer list were then telephoned to create an up-to-date list of contacts to prospect.
- The salesman then worked methodically through this list.
- An immediate briefing of branch management and sales staff explained the strategy and its implementation. They were provided as a reference text on this type of program with Archie Bayvel’s book How to Double Your Turnover in Two Years.
As a result of our action plan our client’s loss-making branch grew sales by a third in the first year while turning its loss into a $300,000 profit.
Conclusion
Our problem was really neglect! The sales decline had nothing to do with the state of the market and little to do with the competition. It stemmed from a desire to handle big contracts and concentrate all marketing efforts there while the smaller customers and opportunities were neglected.
With declining sales had come a decline in profit due mainly to a decline in gross margin. The decline in gross margin was a direct reflection of the concentration on big customers and the lower prices that had to be quoted to win and retain their work.
For both these reasons there was an urgent need to expand the customer base again and reduce dependence on the major high-volume, low-margin customers.
For both these reasons there was an urgent need to expand the customer base again and reduce dependence on the major high-volume, low-margin customers.
* Some figures and dates have been indexed to protect the confidentiality of our client’s data but in a manner that in no way affects the validity of this case history.
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