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Should Your Sales Team Say Goodbye to Low-Value Customers?

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Should Your Sales Team Say Goodbye to Low-Value Customers?

oo many print shop salespeople lose time, and waste effort and money by dealing with customers who just won’t be worth it in the long run. “Poorly qualified buyers can be a significant source of distraction and inefficiency in your shop, resulting in opportunity costs and lost potential,” says JP Hunt, head of partnerships at Inktavo.

“Effective sales professionals use tactics to quickly determine if a buyer is qualified before deeply investing time and resources to nurture that sales opportunity.”
JP Hunt, head of partnerships at Inktavo

The cost of acquiring a new client increases by the day, so it’s important to choose and retain the “right customers.” The flip side of this is “making over” or exiting less-profitable customers. In fact, 90% of company managers say they’ve “given serious thought to divesting customers,” and 85% said they already had, according to the Harvard Business Review. Here are some ways to ensure your team finds and works with the right customers for your print shop.

Ask the Right Questions

The first step is defining your shop’s ideal customer profile to understand which customers are best for your business. Then, the easiest way to train your sales team to quickly discern whether a prospect or first-time customer is the right fit is asking the right qualifying questions early in the sales process. These two things can help your sales team select out the mismatched customers.

Hunt recommends using these qualifying questions to start:

1. What’s your role in this process?

“This identifies if the prospective customer is the actual decision-maker or just an influencer,” he says.  

2. Do you have a set budget for this campaign or event?

“This question helps ascertain if the buyer is committed to a certain spending level and purchase intention,” Hunt comments.

3. Who’ll be involved in making the final decision?

“You’ll learn who the actual decision-makers are,” Hunt says. “You could invite all parties into the sales process, so everyone’s in alignment and you save time.”

4. What’s your timeframe to receive branded merchandise?

“This helps you learn more information about their intent to purchase,” he says.  

Train Your Team For Success

Investing time and resources to develop a comprehensive sales training program is an intelligent business decision for every business.

“Remember, effective salespeople are the economic engine of any organization. You can even consider hiring a sales development consultant to create a sales training program and optimize your business around a sales-driven business philosophy."
JP Hunt, head of partnerships at Inktavo

"You’ll quickly offset the expense of a consultant with increased revenue and efficient sales performance. A quality consultant can also assist with designing a performance-based compensation model to drive good habits and reinforce your shop’s sales training and policies," says Hunt.

To Work... or Not to Work With Them?

“There’s no general rule to anticipate the value of a client until we’ve given them a shot,” says Sarah Emmons, sales manager at Logo Unlimited.

“If a new customer reaches our minimums, then typically they’re worth our time starting out...We also have a system in place that only allows the customer to receive mockups for the order after they’ve paid.”
Sarah Emmons, sales manager at Logo Unlimited

That’s why it’s key to actively monitor all customer jobs, especially new orders. Look for these yellow or red flags:

1. This customer or prospect doesn’t want to hit your minimums.

“If the client can’t meet the minimum to order, we usually move on to the next by pointing them in the direction of a source that can,” Emmons says.

2. You’re losing (or will lose) money on this customer.

“A lot of times clients are just shopping around and looking for the lowest quote or ‘one-off’ items, which we don’t typically do,” Emmons says. “Building quotes sometimes can be time-consuming and a lot of back and forth with the client who in the end won’t proceed with the order.”

3. This customer is wasting a lot of your staff’s time, causing your team or other high-profit customers to suffer.

“We strive to always be as accommodating as we can, but if a client is disrespectful of our time or team, then we’ll finish their current job and kindly let them know we suggest they look for another company to work with,” says Tayler Melhart, marketing and design manager at Logo Unlimited.

4. This customer provides no value to your shop, profit-wise or brand reputation-wise.

“We look for customers who are decisive, consistent and well-organized, with easy-to-understand needs,” Melhart explains.

5. You’re seeing a downward trend in the customer’s profitability.

“On the flip side, a customer who orders and pays regularly is likely a good fit,” Melhart says.

6. Your business is changing directions and a current customer doesn’t fit into the new model.

This is where talking to a customer about your new services can help you determine if they stay on your “profitable” list.

Determine the Actual Value of Your Customers

As you regularly review new and existing client accounts, you’ll need to understand at a glance how profitable a particular customer is. This ranking generally compares how much revenue you generate with a customer, including what they spend and how much you spend in time and resources to acquire or retain them.

You can group customers so that you can see who are the most profitable to the least, so you know where to focus your efforts or when to part ways.

There are a few important metrics to consider when determining your customers’ economic value:

- Customer value (CV) helps you quantify the worth or importance of a customer to your shop. This is calculated by multiplying the average purchase amount by the average purchase frequency.

You can assess the overall profitability and long-term potential of a customer based on how much they spend per purchase and how often they order from you on average. Knowing this information can help you decide which customers to retain, so you can allocate more resources toward them.

- Average purchase value (APV) measures the average amount of money a customer spends over a specific period of time, usually a year. You calculate APV by dividing the total revenue you earned with a customer in that time period by the number of purchases they made.

This number gives you an insight into a typical transaction size for each customer, along with the average value of that customer’s orders. This can help you make better pricing decisions and overall revenue forecasting.

- Customer Lifetime Value (CLV) helps you estimate the total value a customer could bring to your shop over your entire relationship. You calculate CLV by multiplying the customer value by the average customer lifespan. This is a good metric to use with a relatively new or existing customer to get an idea of how much revenue they’ve generated and can potentially generate for you.

Find Out Whose the Most Valuable to Your Business

Reviewing this information about specific customers and in general can help you allocate resources correctly, and reshape customer acquisition, retention, and relationship management strategies.

Calculating customer profitability helps you optimize sales strategies as you segment and identify lucrative opportunities, enabling tailored sales efforts and efficient resource allocation. This process also empowers your business to avoid pursuing prospects with low returns, ensuring a smart allocation of resources.

“These numbers and what you do with them will vary for each business and it depends on many factors, including print capabilities, production efficiency, processes and profit margins. This knowledge allows sales professionals to navigate whether to proceed with certain customers or refer them to another business that might be able to serve their unique needs better.”
JP Hunt, head of partnerships at Inktavo

What to Do With Unprofitable Customers

With returning customers, your sales team will need to review their potential  – and then decide to cut them or try turning them into profitable customers.

Situation #1:

You want to easily convert low-margin customers to more profitable ones.

What to do: Generally, retaining customers is 6 to 7 times less expensive than acquiring new ones, so focus efforts on existing customers. If you increase your customer retention by 5%, you could increase your profitability by an average of 75 percent. “That’s why upselling, cross-selling and add-ons are effective sales tactics to boost average purchase value,” Hunt says. “You can also set policies to regulate minimum order thresholds considering order size and profit.”

Situation #2:

You’re wondering if you can educate unprofitable prospects and customers to shorten the sales cycle.

What to do: At Zome Design, owner Brayden Jessen has been working on updating his website and social media content to educate customers on certain processes, like water-based discharge printing, with FAQs, photos and videos.

“It saves our sales reps time to send customers a link with detailed information and examples,” he says. “This sets up good customer expectations from the get-go. It also helps ensure that each customer receives the same information from sales rep to sales rep. It helps us control how information is given about our different decorating processes.”
Brayden Jessen, owner at Zome Design

Situation #3:

Always ask every customer for referrals.

What to do: Referral-based selling gets hotter leads in the door. Here’s a compelling stat to consider: 91% of customers would give referrals, but only 11% of salespeople regularly ask for them. Make asking referrals part of your sales process!

Put Your Focus on High-Value Customers

Print shop salespeople should focus on working with the right customers to maximize time, resources and profitability. By defining an ideal customer profile and asking the right qualifying questions, your sales team can quickly determine if a prospect is a good fit.

Monitoring customer jobs for red flags and evaluating economic value based on different metrics helps you prioritize efforts and allocate resources effectively. You can also try strategies like upselling, raising prices selectively, educating customers, and asking for referrals to turn unprofitable customers into worthwhile ones before you part ways.

Jul 2, 2023