By Harrell Kerkhoff
Maintenance Sales News Editor
Should your best customers receive a discount? Are there situations when it’s acceptable to “divorce” your company from troublesome and/or unprofitable customers? These and other issues were addressed by Jim McCann, of Spader Business Management (www.spader.com), during an educational seminar titled, “Evaluating Customer Profitability - Is It Time To Fire A Customer?”
Significant capital requirements are inherent in the jan/san industry. Because this limits the amount of available capital to invest in business development, companies must heavily focus on margins. This may mean jettisoning unprofitable customers. McCann highlighted factors that determine true customer profitability in an effort to make sure a business is actually growing.
“The customer evaluation process is very important, but the end result doesn’t always mean ‘firing’ the unprofitable customer. A better way, many times, is trying to change that customer’s behavior,” McCann said.
Even longtime and highly-valued customers may be holding back a company from growing over the long term, especially if these customers are “high maintenance.”
“We all know finding and retaining customers is hard work. Are we then totally crazy to even suggest ‘firing’ a client? For most business owners, the words ‘fire’ and ‘client’ don’t go together,” McCann said.
Therefore, it’s important to take a long look as to whether such a move is warranted.
“Separating yourself from a client sometimes might be the right thing to do, but you have to determine when this is necessary. Ultimately, business is just not about growing revenue, it’s about growing profitable revenue,” he said.
Identifying Your Best Customers
In his work over the years, McCann has asked company representatives to define their best customers. Many have responded that their best customers are the ones who vote with their wallets — willing to pay a fair rate for a high level of service.
“So many times I hear that ‘best customers’ and ‘discounts’ should go hand-in-hand. We may need to rethink this philosophy,” McCann said.
He explained that if the top 10 percent of an operation’s clients represent 80 percent of its total business, then the financial impact of giving these valued customers’ discounts must be fully understood.
Other companies have said that their best customers are those who provide recommendations to potential clients.
“It’s therefore important to identify these types of customers, and then keep them happy,” he said.
McCann added that not every client will, or should, fall into the “favorite” category. It’s also impossible to avoid problem customers. There are customers who are traditionally late payers or perpetual complainers, always looking for discounts.
“You are never going to entirely get away from these types of customers, and, at the end of the day, you still need their business. It’s important, however, to minimize time spent with these people,” McCann said. “Changing problem relationships with clients can help. If a relationship can’t be changed, maybe it’s time for a ‘divorce.’ However, I really believe it’s worth trying to patch relationships by working with a client concerning negative behaviors.”
This may be achieved by creating new guidelines for troubled accounts, such as addressing issues with changing orders, late payments, etc. Communication is essential.
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“If you do ‘cut the cord’ with a client, make sure you have the cash flow to support that cut. Understand what that customer means to your overall business,” he said. “It’s also important to focus on your employees who are dealing with difficult clients. They are the ones who may be facing the brunt of customer complaints. The lives of these employees might be a little more fulfilled, and their relationships with your company better, if these problems can be avoided and/or eliminated.”
Being able to calculate the cost of service, which includes the amount of time spent with each customer, is also vital.
“It’s important to do the math. Know staffing costs at your company per hour. If you have a client causing an employee to do a lot of unnecessary things, it all adds up,” McCann said.
He stressed the importance of listening to employees. They can provide valuable information concerning ways to save money when dealing with specific clients.
“Pay attention to what they are telling you. Learn the whole truth about what is happening on a day-by-day basis while servicing customers,” McCann said. “It’s also important to ask yourself, ‘Have any of my employees considered leaving the company due to a bad relationship with a client?’ This type of question is very important.
Changing the environment and/or relationship with a client may lead to a good employee staying longer with the company.”
When evaluating the profitability of clients, it’s also good to know which business categories these clients belong.
“Look at these categories and determine what percentage of your business is coming from each one,” McCann said. “Once you have broken down categories by revenue, then it’s a matter of taking a look at which customers are the most valuable in each category.”
He added that companies should also understand the difference between “revenue dollars” and “gross margin dollars.” The latter determines how much money a sale generates after taking out expenses.
Know All Your Costs
Implementing a systematic method to pricing is important. This can be better achieved if employees understand true business costs.
McCann spoke about “yield management/variable pricing.” This term refers to “the process of understanding, anticipating and influencing behavior in order to maximize revenue from a fixed perishable resource.”
“The challenge in business is to sell the right resource to the right customer at the right time for the right price,” he said.
“It’s not about how high in pricing you can go, because there is really no ceiling. In reality, business usually comes down to ‘how low can you go?’
“Knowing how low you can go with pricing is probably more important to your profitability than trying to get the maximum price. The problem is, there are many who are thinking too much about discounts, while not thinking enough about getting the maximum from a sale. This is the dynamic that must be figured out.”
He added that many high performing business owners are able to show a consistent propensity for understanding and using a proper variable pricing structure. Thus, they are consistent in the amount of revenue per day their businesses receive.
NPS Corporation Celebrates
Green Bay, WI-based NPS Corporation, a manufacturer of towel, tissue and spill control products, is celebrating 20 years of being in business.
“NPS was founded in 1996 with the purchase of a small, niche-packaging business from Kimberly-Clark. Since that time, NPS has made 10 acquisitions, which has allowed it to become a key player in the towel, tissue and industrial spill control markets,” according to a company press release.
“I'm very proud of what NPS has become in the 20 years that I have owned the company,” said Andrew Hetzel Jr., president and CEO of NPS Corporation. “NPS has exceeded my expectations and then some. We simply would not be in the position to celebrate this anniversary without our employees, customers and suppliers.”
Hetzel said he attributes the long term success of NPS to a variety of things, but the one constant that has stood for 20 years is the company-wide commitment to its customers.
NPS markets its towel and tissue products throughout North America and also offers a full line of spill control products that are distributed in more than 40 countries worldwide. Brands include Merfin, Response, Retain, React, Spilfyter and Sustayn by Spilfyter. For more information, visit www.npscorp.com.
Zephyr Now Offers An
Expanded Selection Of
BBL™ Value-Price Mops
“Zephyr has expanded its BBL™ line of economically priced mops. With the expansion, Zephyr now offers a full line of value priced products that are competitive with imported mops,” said the company.
“These products are offered in natural and blue options as well as both cut-end and looped-end mops. This expansion includes numbered and full-ounce weight mops with the choice of narrow or wide headbands.”
Zephyr is manufacturing the new products in its Sedalia, MO, plant.
“This gives Zephyr the flexibility to produce what customers want, right when they want the product. Custom products of any size will be available to customers with the ability to private label all of the new products,” according to a press release.
Zephyr is a family-owned and operated manufacturer located in Sedalia, with a complete selection of mops, brooms, brushes, handles and associated products available to wholesalers.
Zephyr serves North America with specific products aimed at the institutional, industrial, janitorial and food service markets.
Visit www.zephyrmfg.com for more information.
Triple S Adds 2 New
Blue Ribbon Linen Supply, of Lewiston, ID, and Imperial Valley Distributing, of El Centro, CA, are both now Triple S (SSS®) members-dealers.
Under the agreements, Blue Ribbon and Imperial Valley Distributing can now market the complete line of SSS® brand cleaning products and systems. They also now have access to the Triple S Achieve Workloading analysis tools.
Triple S Executive Vice President of Sales and Marketing Eric Flinton said, “We are pleased that Gary Stachofsky, president of Blue Ribbon Linen Supply, and Alma Caballero, president of Imperial Valley Distributing, and their teams, are now members of the Triple S family. We look forward to a long-term relationship as well as the opportunity to assist them in their efforts to provide lowest total cost solutions to their customers through the application of professional products, systems, training, and world class logistics.”
Based in Billerica, MA, Triple S is a member-owned, national distribution, networking, sales, marketing and logistics company in the facility maintenance industry. With 120 member-dealers and three regional distribution centers across the United States, Triple S offers nationwide service to the education, healthcare, commercial, industrial, and government markets.
Visit www.triple-s.com for more information.
WAXIE Names Nena Smith
Sales Manager In Livermore, CA
WAXIE Northern California has named Nena Smith sales manager in Livermore, CA. She previously held the position of sales manager with WAXIE Seattle.
Smith began her career at WAXIE in 2008 when she was hired as a sales administrator/sales secretary. In less than a year, she was promoted to customer service supervisor, and two years later she was again promoted to her current position of sales manager.
WAXIE Sanitary Supply is a family-owned distributor of sanitary maintenance supplies.
Based in San Diego, CA, the company has over 800 employees working out of inventory centers servicing the western United States including California, Arizona, Nevada, Utah, Idaho, Oregon, Washington, Colorado and Alaska.
Visit www.waxie.com for more information.