During times of change, businesses need to double down on their best customers. There are macro-economic trends that are largely out of your control. The labor market is tight with growing compensation expectations. Inflation is increasing the costs of just about everything, including raw materials for printing like ink and paper. Knowing who your best customers are and why allows you to focus scarce resources on those that drive revenue and profitability. The notion is hard and counterintuitive for most printers. They want to always say yes to any customer request, but it’s a critical way to future-proof your business.
Consider these five steps to profit from your data:
- Find your 80/20
The Pareto Rule, named after the Italian economist Vilfredo Pareto, states that 80% of consequences come from 20% of causes. The concept is more commonly known as the 80/20 rule and can be applied to analyze the revenue of your customer base. Most of your revenue probably comes from only 20% of your customers. Why, then, are all customers treated the same regarding pricing, customer service, sales efforts, and other resources?Action: Generate a sales or revenue by customer report.
- Where’s the revenue?
Now that you have found the most valuable customers, the vital few or roughly 20%, look at the key sources of revenue. Simply put, what are these customers buying? Look for similarities in the types of products or services that this set of customers purchases. Identify opportunities to sell the most common print products across these customers, especially if they are in similar vertical industries or share common business needs.Action: Generate a sales/revenue report for each customer by product type.
- Where’s the profit?
Are the most popular products profitable? It is time to analyze the revenue versus costs by product type and by customer. Looking at the profitability of your top customers and the types of products ordered can provide insights for sales and marketing. Perhaps half of the orders from your most profitable customer are wide-format signage. What’s the percentage for the other top customers? If it is lower, then sales and marketing should work to increase wide-format signage orders using promotions or bundles. Knowing your most profitable products is the key to focusing your sales efforts.Action: Generate profitability reports by customer and product type.
- Automate the 20%
Decreasing operational costs can also improve profitability. Walk the workflow for your most and least profitable types of applications to document every touchpoint. Can any current tasks be eliminated, improved, or automated to reduce costs? If the costs and profitability cannot be improved for the least profitable jobs, it is time to outsource, increase pricing, or eliminate them from your offerings.Action: Walk the workflow for the best and least profitable types of print applications.
- Shift the Business
Develop a plan based on this data and analysis to focus on your best customers and most profitable print applications. Resist the bias that the amount of revenue is more important than the quality of revenue, and let the numbers be your guide.
Accurate data is critical for this type of business assessment. Your print MIS solution is the single best resource for this data. Capturing the costs using shop floor data is also essential for a clear picture of profitability. If you do not use a print MIS, it’s time to implement one, but you may be able to pull some of the information from your accounting software. Let the data be your guide to analyzing your business for future success!
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