Print Solutions Magazine, March 2005 -- Mailbag

Editor’s note: These letters are responses to our Question of the Month, “Does your company segment customers into categories, with some clients receiving preferred treatment? What advantages or disadvantages does this strategy yield?”

Segmenting Customers Pays Off

We implemented a customer segmentation program about a year ago. It’s working very well, helping us to focus our energy on customers who contribute, or have the potential to contribute, to our success. Ten years ago, we had more than 8,000 customers with no single one accounting for more than 3 percent of our sales. Today, we have fewer than 3,000 customers, and the top 49 customers make up 50 percent of our sales. I expect this trend to continue. It was clear that the changing marketplace required us to perform differently internally.

We developed a customer segmentation evaluation process using five criteria: payment history, error rate, sales volume, sales potential and quality of communication. The first three are facts derived from our history with each customer. Sales potential often is a guess based on what we know or can find out about each customer. Quality of communication involves clarity of orders received, willingness to accept responsibility for a successful relationship, willingness to work through issues that arise, honesty, trustworthiness and integrity. This is a harder category to score and often generates internal debate.

Our segmentation review process helped us to identify opportunities with existing customers, including additional sales and the need for more training to improve customers’ electronic file submissions. We use customers’ rank as a factor in many decisions, some of which include pricing, our willingness to accommodate special requests, priority of work and assignment of key account representatives.

Bob Hodgins

President

Hodgins Engraving Co. Inc.

Batavia, N.Y.

We have a customer rating program that we refer to as “the list.” Our top customers are “A list” customers, the next tier is “B list” customers, and so on. If a customer becomes an “F list” customer, we choose to not conduct business with that organization. The list helps our customer service people manage their time more effectively. Time is a precious commodity in our industry, and our entire sales staff benefits from knowing which customers deserve the most time.

Bob McAleavey

President

Specialized Printed Forms Inc.

Caledonia, N.Y.

Those who prompt-pay get priority, followed by those who generate a lot of volume and pay within terms. If a client leaves us hanging for 60 to 90 days, no matter its volume, we don’t expedite its jobs. We have a number of loyal customers who are very much print professionals, and we cater to them. We have lost a few customers due to this philosophy, but we look at the big picture. Our sales have increased, profitability has increased and our customers are happier. We have weeded out those who aren’t favorable to work with, and we focus on the people who make us money.

Taira Williams

Production Manager

Sekan Printing Co. Inc.

Fort Scott, Kan.

Our segmentation strategy is simple: With regard to existing customers, those who pay promptly get the best treatment. Those who don’t still believe their treatment is the best. With regard to prospects, those with whom we’ve invested the most time get preferred response. In addition, skilled, educated “value buyers” rank higher than “price shoppers” with no loyalty. The advantage to us is relationships with greater loyalty and prompt payment.

Marc Laucks

Owner

Marc Laucks & Company Inc.

York, Pa.

Talk to Us

We encourage feedback about stories published in Print Solutions, as well as in DMIA’s E-Weekly and Independent Management Report e-newsletters.

Question of the month: What’s the most significant marketing, sales or management challenge you or your company faces today?

Email your insight to bholt@printsolutionsmag.com, or send a letter to Print Solutions, 433 E. Monroe Ave., Alexandria, VA 22301.