Increasing Your Share of Wallet

Customer Segmentation and Key Account Management

The Company

A privately held manufacturer and importer of commercial supplies, the company sells its products primarily to distributors and wholesalers through the use of manufacturers’ representatives. 

 

The Situation

The company had a strong history of growth and profitability, and over the course of more than four decades had developed a very broad customer base.  However, the company’s growth rate had slowed, and the company was seeking to maximize the opportunity within its existing customer base. 

 

Keystone was engaged to assist the company in developing a strategy to increase its share of wallet, with the goal of generating profitable growth.

The Approach

Keystone used a fact-based approach to identify the areas of greatest opportunity:

  • Detailed analysis of historical sales and profitability by product and customer segment

  • Management interviews

  • Customer and Manufacturers’ Rep survey

  • Select Customer and Manufacturers’ Rep interviews

  • Industry research

Key Findings

  • Recent growth was driven by price increases, raising some question as to the sustainability of continued growth

  • Fewer than 15% of customers accounted for 90% of revenue

  • Although profitability was inversely related to customer size, larger customers received the bulk of management attention

  • Outsourcing of sales efforts to third party rep agencies had created an unintended customer intimacy gap

  • Approximately 90% of sales came from deviated pricing, requiring an a significant amount of time from the sales management group

Recommendations

1. Revamp go-to-market strategy through customer segmentation

Working together with the management team, Keystone developed a segmentation methodology for the customer base and recommended different account management and account penetration strategies and tactics.  These recommendations included the adoption of key account management for large national customers, regional management for the mid-sized customers and a low cost to serve model for smaller customers.

 

2. Realign the sales organization

Keystone recommended that the sales organization be aligned based on the requirements of each segment. Rather than an  “everyone does everything” approach, the realignment provided a structure based on areas of expertise and created greater accountability.  The ability to focus on specific segments allowed sales professionals to foster better relationships with customers.

 

3. Simplify the pricing process

Keystone recommended a simpler pricing model that would allow managers to spend time on more value-add activities while maintaining gross margins.

© 2019 The Keystone Group. All rights reserved.

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