Finding New Customers and Markets Using Internal Information

Nov. 5, 2012
Changing from an order taker to an order maker, is about creating a system to find new prospects and market opportunities.

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

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 Manufacturingand the Growth Planning Handbook. He is also the President of MPC Management.

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