After the second or third quarter, dump all of this year’s sales alongside last year’s total numbers by customer. Line the results up and compare each customer’s current year total as a percentage of the previous year. Compare that percentage to the percent of the year lapsed.
On July 1st, why is YTD sales at only 40%? For example, on July 1st a customer’s sales should be about 50% or more of the previous year’s sales. At the end of the third quarter, it should be roughly 75% of the previous year’s total. Do this for all of your customers’ highest % down to zero or no current year’s sales.
Eliminate all of those customers that exceed last year’s totals and only print out those that are lagging. Distribute these reports sorted by sales representative and ask why these specific customers are ordering less and why their numbers are lagging. You want to find out why some are gone or smaller than the previous year. You need to know the reasons because some may be good, but some may point out hidden or indirect problems developing in your company.
Examples of answers you may receive and your response:
- Foreign sourced: Customer is now buying from a foreign supplier at a much cheaper price. Note: How much cheaper is he now buying the foreign made product? How long must he wait for shipments? Was he given attractive payment terms? Is the quality of the foreign made product the same or does it not matter? How much inventory does the customer have on water or sitting in warehouses tying up his internal capital? What is the interest cost of this additional inventory in transit? What was the additional insurance for inventory outside the country? How long is it between the time of an order and the time of a receipt for a foreign competitor? Were these questions answered before this occurred? Do not write off the customer. Go see the buyer to discuss options and at least keep part of the account.
- Product now not as popular: The customer is ordering less because he could not sell it all once he bought it. That which he did not sell at a healthy margin he ended up selling at a large discount to clean it out of his warehouse. Note: What is wrong with the product? What are the complaints about the product? What product on his shelf is more popular or replacing your product? The sales person needs to ask what changes need to be made to keep up?
- Competition keeps inventory on hand: The customer can order off the shelf elsewhere, even at a slightly higher price. He found this out and never asked your firm if this was available or when he did in the past, your sales person incorrectly told him your firm could not stock inventory. When your sales person ask you if this correct, you understand you are not meeting with your sales staff often enough nor is this their fault. This may be some indication that you are failing as a manager, especially if you hear this from different sales personnel. It is not their fault; they are not trained.
- Price was too high, overdesigned: The customer went to another competitor and had the product redesigned and stripped down to a much cheaper version. He never asked your sales person for this and your sales person never mentioned the dissatisfaction that the client expressed. He never thought it was important enough to tell you. You need to evaluate your sales personnel and their judgment.
- Late deliveries: Customer complained numerous times about getting product late. Your internal sales people stated the customer wanted shipments too quickly. No one asked if the customer would guarantee to eventually buy stock quantities kept in inventory so shipments could go out within 24 hours. This will not draw attention to you until you hear it three or four times and discover you have a lousy delivery record according to several of your customers when you directly ask them about it.
- Customers vague and difficult to deal with: Your sales representative had a number of problems answering your questions and getting to any ‘meat’. His response to you is that some customers do not tell him a specific reason or he may shrug off your query and simply retort that the client’s business is down. Your sales representative never quite uncovers any detail because he is unable to ask questions and decipher what is going on in the market. You may need new more sharp sales personnel. You may not be paying enough if you want good effective sales people.