I hate to remind you of this, but we’re facing an election in 2020. And during the election process, each of us will be placed in our own little demographic silo, in the hopes that others in the same silo will think the same way, respond the same way, and most importantly vote the same way. That way, political ringmasters can target their resources and spend far too much money trying to influence where your votes will go.
We’re more complicated than that. The more they want to put you in a demographic, the more likely you’re going to break the model. What’s important to you, what drives your decisions and impacts your beliefs, is far beyond who you happen to be or what you look like. We, by our very nature, want to defy categorization.
Categorization is complex. The more detailed you get, the closer you are to having categories of just one member.
I bring this up as categorizing customers is a tricky subject. The common method is to define them by who we think the customer is: a residential contractor or industrial facility, a government account or an OEM. We do this because we hope that if we can treat customers in that same category the same way – they’ll buy the same kinds of products, pay the same prices, require the same sales support. Of course, it only takes a glance at your business data to see that every customer remains quite different from each other. It’s hard to build a set of business rules that works for each demographic.
Categorization is critical to help direct workforces. If data is to lead to action, you need the business rules for how you respond to one demographic’s data compared to another. Who your customers are and how you organize them is vital. I would suggest you consider the actions that could result from reviewing this data, and perhaps grouping your customers in that way. Let demographics fit the actions, rather than the actions fitting the demographics.
A simple example might be grouping customers by how you manage them. Account Manager-led accounts versus Inside Sales-led accounts versus self-managed accounts. That way you can identify what portion of your revenue is controlled by different aspects of your workforce so you can set the right actions if measures suggest you need to change course. Critical customers could be separated – the top 40 accounts that drive a large chunk of your revenues. Do you have specific reporting for just them?
What if you grouped your customers by their profitability? High margin versus medium margin versus low margin? 
Would it change your business strategy if you knew 40% of your revenue and 75% of your gross profit was high margin accounts and their sales are dropping right now?
Or, what if you added an extra level of sophistication and added in cost to serve to have true profitability? Factor in the costs to support each customer using what they buy and how they buy, and how you support their accounts. It would be an eye opener if you could see measures each month on the customers who add to the bottom line and those who take away. Perhaps you’d be less concerned if sales were down among customers costing you to support them…
Another option would be to divide your customers by wallet share. Those customers with which you have the bulk of their spend versus those where you only have a little. Which would be the better demographic to send your hunting salespeople? Alternatively, you could divide your customers between long-term, stable relationships, new customers, fading customers and lost customers. Could you say, right now, how much of your yearly revenue depends on new accounts? Can you quantify right now how much revenues have increased or decreased with your long-term, high-relationship customers?
If data is to transform into action, the data has to more closely resemble the action. And, with only a limited amount of action available, we need to become more selective on what we target to make impacts in our business results. If your marketing team is to create a new promotion targeted at increasing wallet share with new accounts, your reporting needs to identify and track the customers who fit that criteria. Sounds simple, but is putting a report like that together simple or does it take three meetings and a data analyst in a basement running special reporting?
None of this is easy but looking at your business differently can give you a whole new perspective on what’s important. I’m reminded of a new reporting suite available at a previous employer that allowed the executive team to review sales by pricing methodology: project jobs versus special pricing agreements versus small project jobs versus flow goods. Flow goods was considered the leftover business that didn’t get much attention, but when they discovered just how much revenue, and more importantly, how much net profit was driven by flow goods, it became the area where actions were focused.
Within your data is a customer demographic that will unveil just where your greatest opportunity is, and where your resources should be tasked. Like with elections, it’s not going to be defined by who your customers are or what they look like, but how they behave and what drives their purchases. Once you uncover that, you have a roadmap to using data to transform your results.
Having the ability to interpret the data obtained from the Market Data Program can give you the knowledge to take actions that ensure the future growth and the health of your organization. Contact the member engagement team to learn more.
Mark McGready
Mark McGready has been working with data analysis for over 20 years in the electrical industry. For the last 10 years Mark founded and ran Jigsaw Systems Inc, a successful data analysis and process improvement company that focused on key sales and marketing challenges like SPA contracts, pricing matrices, inventory analysis and harnessing Point of Sale. Recently Jigsaw was acquired by SPARXiQ, formally Strategic Pricing Associates, in order to widen the services and capabilities available to the industry. Mark brings a combination of understanding data with a commercial sense of real world applications. His tools have generated millions of dollars in top line and bottom line results with his long list of clients.