/ Compact Tractor Dealers Ignore Two-thirds of Their Potential Website Customers, Industry Survey Shows #211
- Jun 3, 2009
- Central Connecticut
lol, the company I work for does that and we are not unique. We call it 'activity based costing'. We know how much gross profit $ every customer generates and from that we subtract:. . .
I once read an article about 2 brothers who built a successful auto parts distribution business, but it was consuming all their time. Their wives gave them an ultimatum, either scale back, or we're gone. So they analyzed their customer base, identified their "high maintenance" customers, and "fired" 25% of them. They sent them letters, thanked them for their business, gave them referrals to three of their competitors, and wished them well. The next year, their profit increased.
Some customers consume more energy than they are worth.
cost of carrying their receivable (the longer they take to pay, the more it costs us)
cost of picking their orders (we know how much it costs us to pick an average line on an order, simple math after that)
cost of deliveries
cost of returns
cost of inside sales support (how many times do they call to place orders)
It usually boils down pretty much to average order size. If the customer is giving you small orders you are better off without him.