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I recently had the pleasure of attending a fascinating Webinar.  Ok, truthfully, how often do we say that about a Webinar? But, yes, this was fascinating because 1) it brought the thought leadership and research results of academia into the business world, 2) the content was something new and impactful for a company’s bottom-line and 3) it encouraged positive change in B2B interaction and human behavior.

Customer Stratification – A picture tells a thousand words

First, Dr. Barry Lawrence of Texas A&M University spoke about the importance of Customer Stratification and Cost-to-Serve analysis. According to him, Customer Stratification is the process of classifying customers into groups based on four factors – sales volume, gross margin, customer loyalty and cost-to-serve.  He walked us through the Customer Stratification Framework that he has developed in working with hundreds of companies. The names of customer classifications he has used in his framework – Core, Opportunistic, Marginal and Service-Drain Customers are pretty catchy too. Now imagine, being able to see this classification of all your customers on your monitor or an iPad. As it is often said, a picture tells a thousand words!

It turns out that not many companies actually do this type of analysis even though most of the data is already there in their ERP and CRM solutions. Those who have done it have seen a significant improvement in their net margins and, importantly, have gained better understanding of their customers to serve them better.

Arming Sales Team with Actionable Customer Analytics to Boost Net Margin

Dr. Barry Lawrence was followed by John Mansfield, Vice President Business Development at Graybar Electric. John spoke about how they have leveraged Dr. Lawrence’s work along with their partnership with SAP – to do all the extensive calculations that are needed to be done (SAP HANA came into play here) and then meaningfully surface the Customer Stratification dashboards to their sales people in real time.

According to John, the rollout of Customer Stratification analysis and the visual dashboards, to a limited set of Graybar’s branches, has fundamentally changed the way their sales teams are now working – i.e. in how they are strategizing, collaborating and building deeper relationships with customers. The Sales teams have developed a number of pragmatic and actionable sales strategies for all their customer types – from how much time they ought to be spending with each type to how to nurture a marginal customer into the core category to how to have a dialog with a customer who has a high DSO!

The excitement in the Sales team around this solution is palpable. They are now armed with much better insight – enabling them to win in the hyper-competitive marketplace while ensuring they achieve profitable sales growth. The business value of this solution is well captured in this quote from one of their Sales Reps – “Customer Stratification has the power to enable us to transform our company from being product-driven to a customer-driven. It has helped me understand my customers in greater detail that I call on a daily basis. I started working on my Service-Drain customers first.  <Customer> was very surprised that the average order only had four line items out of 287 orders in 2011.”

Now wouldn’t you want to have similar Customer Stratification analysis available for your Sales teams? Access the Webinar here and see if this is something you want to do at your company.

Sometimes it’s not about running faster but changing the way we run!

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Neetin Datar is the Senior Director of Industry Marketing for Wholesale Distribution at SAP. His enterprise software experience spans ERP, E-commerce, Global Trade, GRC, Warehouse Management and Distribution markets. He is passionate about technology and its use by distributors to run better.

You can follow him on twitter @neetin_datar

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