If you keep a good database with information on both customers, prospects, quotations, and leads there is a lot you can do with this internal information that will help you find new customers and market opportunities. Here are some suggestions:
Profiling Customers - Can you identify the best customers to sell –now and in the future?
Profiling your customers is the first step in finding new customers because it is important to know how to profile the best customers, the right customer, a profitable customer or one with future sales potential - to grow your business profitability The simplest way to achieve this is to carefully profile the ideal type of customer; then find more like them.
Begin by printing a list of all accounts sold in the last 12 months (can vary from 1-3 years) by sales volume - from the largest volume to the smallest volume account. It is also very helpful to include the average profit margin percent of each account before overhead. This may appear to be a difficult task - does it anyway. The information will pay off over and over again. If you can’t provide margin information, then begin with a list by sales
Then assign NAICS CODES to each customer account (See following chart). The government has devised a method of classifying all products with a code. It is called the North American Industrial Classification System ( NAICS ). You can find it on the Internet by going to www.naics.com.
You now have a list of customers that will include the following information.
Company City State Sales Gross Margin NAISC Code
DEKA Austin TX 800,000 24 33441
OECO Poplar MA 575,000 40 33441
Puget Portland OR 570,000 41 32614
Evaluate Good (+) and Bad (-) Customers
The next step is to determine Good and Bad customers by simply marking each customer account + or -.
Yes No
1. Are they profitable? Sales - C.O.G. Sold. =Gross profit ___ ___
2. Customer has potential for significant future revenues? ___ ___
3. Do they truly value what you do well? ___ ___
4. Are they a springboard to other like customers (referrals) ___ ___
5. Can you serve them better than competitors? ___ ___
6. Is this customer financially healthy? ___ ___
7. Do they pay their bills on time? ___ ___
8. Do indirect expenses reduce your gross profitability such as: ___ ___
Returns/allowances, warranty, paperwork, field service, special engineering, credit terms, complexity of quotes, high number of sales calls, senior managers time, inventory demands, price discounts, special delivery, overtime.
Now go through the list and mark each customer as a plus+ or a minus-. A plus + is a customer that you think has good future sales potential. The NAISC codes for these Best Customer Profiles will help you find more like them. You will also be able to guide the sales organization with a list of real target prospects
The customer profiling method also forces you to consider what you will do with bad (-) customers. You are entitled to a fair margin. And good customers - even tough ones - will recognize that you, too, are entitled to make a profit. You may need to prune some bad customers for a variety of reasons. If this happens you will immediately be in the position of having to find customers to replace them and launch a program of market diversification.
Using your Quotation List to Find New Markets
Begin by printing a list of all quotations in the last 12 months (can vary from 1-3 years) by sales volume - from the largest sales volume to the smallest volume account.
Each customer account was assigned an NAISC code. So the next, thing to do is to group these customers into market niches. If your customers are in a spreadsheet, you can sort the NAISC Codes from the smallest to the largest number.
The market segment groups can then easily be identified and grouped together as shown in Figure 1.
For clarification, an industry is usually a 3-digit code such as 322 in the Paper industry. Tissue/towel is a general market segment with a 6-digit number. A very specific market niche can be a 6-12 digit sic code number. .
Determine Market Size by Prospects
This requires that you access a database such as the Dun and Bradstreet’s I-MARKET and find out how many prospects are in each market segment. This will give you a preliminary idea of the market size you will be "prospecting." For instance, the market niche designated as tissue towel (NAISC 3221220 in the next chart has 221 prospect companies in the U.S.
Figure 1- Grouping, Prospects into Markets and finding Prospects
Market Niche NAISC Codes #of U.S. Prospects
1. Tissue/Towel 32122 221
2. Bottled Water 312112 132
3. Dairy (cheese, ice cream) 311520,311513 1,833
4. Meat Products 311612 1.344
5. Canned Foods 311423 638
6. Frozen Foods 311410 474
7 .Cereals 311234 556
8. Spaghetti, Macaroni, Pasta 311823 161
9. Soap, Cleaner, Bleach 325611 621
10. Candy, Confections, Nuts 311320,311330 315
By developing profiles of your Best Customers and Markets using NAISC CODES and employee size you can now find more prospect companies like the profiles. All of the market segment NAISC codes listed above were looked up on the D and B online database. Each code revealed the number of potential prospects for the entire U.S. You can also look up these prospects by State and county and purchase a list of the prospect companies for any specific geographic area.
Develop a Sales Plan to Begin Making Sales Calls
Congratulations. You now have the information you need to develop a marketing or sales development plan. A complete plan will usually include:
· Lead Generation program
· Prospect Qualification system
· Telemarketing to explore new markets
· Target Account list for each territory
· Sales Call Schedule.
So how do you use this stuff? Simple Market Probe Example
Johnson Packaging is a manufacturer of specialized equipment that can fill Kraft paper bags. In assigning NAISC codes to their quote list they found a new market niche in the cheese industry. The customer wanted to replace a manual method of filling bags with some kind of an automatic machine. Johnson Packaging would have to do a lot of new engineering to modify their standard machine to handle the dry food products, but they quoted the new application and were awarded the order.
They installed the machine and it worked great. The next question was – how could they find more customers and sales for this specialized machine in the vast food industry? They only had three manufacturing reps and had to operate with a tiny marketing budget.
The specific product was cheese whey. A consultant who had worked with the company from its inception helped them look up the NAICS code on their current customer. The following chart shows the results of this simple search
NAICS code search
Market Segment NAISC Code SIC Code Plants
Food industry 311 20 23,000
Cheese – natural & processed 311513 2022 712
Processed cheese 311513A 2022-01 332
Dry condensed cheese & whey 31151416 2023 191
Finding the market niche – The machine that Johnson Packaging designed was a very specific design for a very specific product application – dry condensed cheese whey in 50 lb. bags. They could not sell this machine to all dairies or all cheese plants. The market segment was all plants that processed dry condensed cheese and cheese whey in the U.S. as a by-product. There were 101 plants in the U.S.
Finding the number of prospects in a market niche – The market segment was further refined into a specific market niche by looking only at plants with more than 25 employees. Johnson learned from the initial customer that plants with less than 25 employees usually did not have the production rates to justify an automatic filling machine. When the list was refined further to eliminate all small plants with less than 25 employees, the market niche turned out to be 85 plants in the U.S.
Locating the prospects geographically – The geographic distribution of these plants in the U.S.
State Number of Cheese Whey Plants - California 7, Missouri 1, Pennsylvania 4, Colorado 1, Mississippi 2, South Dakota 1, Connecticut 3, Montana 1, Tennessee 3, Florida 3, North Carolina 1, Texas 2, Iowa 1, Nebraska 2, Utah 1, Illinois 6 New Hampshire 1 Washington 3 Kansas 1 New Jersey 5 Wisconsin 11 Kentucky 3 New York 5 Michigan 5 Ohio 3 Minnesota 8 Oklahoma 1 Total 85
Sales prospecting in the new market niche – Johnson Packaging purchased the list of addresses and phone numbers of the 85 plants which were located hundreds of miles from the rep’s office. With only three part-time independent reps that were located in Los Angeles, Chicago and Boston, it was going to be difficult to call on all 85 plants in 27 states. The factory decided that it would be most efficient for the factory to do the initial prospecting because of sales call costs
Qualifying leads – The factory hired an outside business to business firm that was skilled at sales prospecting for industrial products. The B to B firm called every prospect company on the list at least three times. The results of the sales prospecting were as follows:
Transactions Activity level
Total number of plants called 85
Successful contacts 70
Faxes sent to contacts that process whey 55
Successful follow up calls and contacts 45
Prospects who wanted literature and more info 20
Prospects who wanted pricing 10
Sales over a 12 month period (5 units)
Sales over a 12 month period (dollars) $500,000
Finding new markets and customers is not the responsibility of the sales reps. It is up to the manufacturers to profile the best customers, find new market niches, and determine how many prospects are in each niche. It is also very important to qualify each prospect before a direct sales call is made. The key point is that changing from an order taker to an order maker, is about creating a system to find new prospects and market opportunities.
Mike Collins is the author of "Saving American Manufacturing" and the Growth Planning Handbook. He is also the President of MPC Management.
