High-Leverage Accounts: The Gateway to High Profit Rates
Tuesday, October 03, 2017—The High-Leverage accounts segment of your customer catalog is the key to turning account penetration into high profit rates for the whole company. In this video, I'll show you how to identify them, and how to make a lot more money.
At WayPoint, we've spent a decade analyzing tens of billions of dollars of transaction data from wholesale distribution companies. A great deal of this time has been dedicated to understanding the underlying profit drivers that produce success, or prevent it. And we've learned a lot about what you can do to generate high profit levels.
What most companies can't see are the precise costs incurred for each sale, and whether the sale is actually profitable or not. Our clients can, and this is perhaps the most important tool ever invented for setting prices, negotiating logistics, and working with the customers on win-win scenarios.
Every other segmentation method you may have tried, will not have produced very good results, because customers of similar type, size, industry, or geography will have wildly different profit drivers. Segmentation by demographics simply doesn't work very well.
When done right – that is by profit-value, segmentation is one of the most powerful tools you can use to drive profits.
To make the analytics actionable, we've developed an exclusive profit-value customer segmentation capability that classifies your entire customer base into six classes. Each class can then have its own action plan that will be the right move for every customer in the class.
One of my favorites of the six customer classes is the High-Leverage account group. High-Leverage accounts are those that produce extraordinary profit rates, as I can show you here on a WayPoint report.
As you can see here, the High-Leverage (or HLA) accounts are those with the blue HLA block. The NBC (or profit) column shows the percentage of revenue that gets to the bottom line. Looking that the top few customers on the report, you'll notice the HLA accounts produce significantly higher profit rates that the non-HLA accounts. The system is identifying accounts that combine high margins with low cost-to-serve rates, producing high profit rates.
This is why the HLA group (usually 5% - 8% of your customer base) is the best target for sales penetration programs. You know – selling more of what you have to the customers not yet buying everything they could.
Having a targeted customer list for an account penetration program substantially narrows focus, reduces workload, and increases time dedicated to each of the target accounts. Every incremental sale carries a high profit rate, so not only do profits rise, the profit rate of the whole company rises as well.
The takeaway is that identifying your own HLA group increases both the success, and the results, of your account penetration work.
If you'd like to know more about the sophisticated analytics that help our clients out perform well just about everyone visit our website at http://www.WayPointAnalytics.net.
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