A Focused Approach to Customer Development

Small customers are important but how do you develop them with limited resource? There are many examples of manufacturers who find that they have lost control of their markets to their distributors. This is partly due to the trend of a few players taking control of the distribution channels, but also because manufacturers have reduced their sales teams in an effort to control costs. Often the result is a loss of contact with the final customers. As a result the manufacturer becomes increasingly dependent on the distributor to manage the end customer and provide feedback about customers’ needs. Very often the message from the distributor is “your product is the same as your competitors, if you want us to promote you then you must give us the best price.”

To prevent this situation it is important to maintain contact with the smaller outlets that act as an intermediary between the distributor and the final customer. These might be specialist retailers, small contractors, independent merchants or wholesalers. But to do this cost and available resource are an issue.

Customer segmentation

One approach, which will allow you to maximise the effectiveness of your sales resource, is to divide your customer groups into segments. Some will represent high potential for your business, these should be focused on and developed by your sales force, perhaps not as direct accounts but receiving visits when a salesman is in the area to update them on new developments and get market feedback. Others will offer less potential, although still important. These can be a target for telesales, or communicated to through direct mail or a house magazine.

Profiling customers

But if you have been relying on your distributor how do you find these smaller customers, and identify those with potential? One cost effective solution is profiling. By purchasing contact lists and then using telephone profiling it is possible to gather valuable information about buyer preferences and hence segment the customers. This also allows a mailing list to be developed which has been fully qualified.

The benefit of this approach is that you now have a much better understanding of the market, and can influence the demand for your products being passed onto distributors. By passing on enquiries from these smaller customers to the distributor you demonstrate the importance of your brand and increase your value to the distributor, reducing the price pressure you may be under.

Case Study

Competitive Advantage recently completed a project helping a manufacturer of decorative products to identify and develop a network of specialist retailers.

Potential retailers were contacted to confirm that they sold this type of product. Those that did were then asked a few questions to establish if they were in the right market sector, the manufacturers’ ranges they carried, the distributors they purchased from and if they were interested in the manufacturer’s products. From this a picture of the key players in the distribution sector was gained, the presence of the principal competitors noted and most important – a list created of retailers interested in stocking the manufacture’s product.

An initiative to develop the sector was then implemented in co-operation with the key distributors. The initial focus was on those retailers who offered the best potential. These received joint calls from the manufacturer and distributor and were offered an attractive package of benefits. Other retailers with potential will be contacted by distributors in the future as well as receiving direct mail from the manufacturer.

Response to the initiative from both the distributors and retailers was very positive, strengthening the manufacturer’s position and generating a significant increase in sales.

Copyright Chris Ashworth 2003

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