MIT Sloan Management Review

Management of Information Systems, Marketing

 

Selectively Pursuing More of Your Customer’s Business

By James C. Anderson and James A. Naurus

April 15, 2003

If they wish to achieve profitable, sustainable growth, suppliers seeking a larger share of their customers” wallets need a fine-grained, disciplined approach to getting, leveraging and documenting knowledge about those customers.

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As suppliers in business markets search for profitable growth, it is natural for them to seek more business with the customers they presently serve. After all, it appears to be conventional wisdom that it is easier and less costly to gain incremental sales from present customers than from new customers. Yet, most suppliers lack sufficient knowledge about customers to devise or implement anything but the most sales-oriented growth strategies and tactics. Simply put, most suppliers plan to sell customers more of what they have been selling them, plus other products thought to have the highest margins based on knowledge of manufacturing cost. As a result, senior managers at many suppliers are finding that although their firms are achieving sales growth as planned, the accompanying growth in profits falls disappointingly below expectations.

To gauge their knowledge of their company’s current customers, managers should ask themselves a few questions: What percentage of each customer’s total purchase requirements is their firm providing; that is, what is the company’s share of each customer’s business? How does that share of each customer’s business vary across product offerings sold and across the different locations each customer has? For each customer, which of the company’s product offerings delivers the greatest value relative to competitors’ offerings and which ones deliver the least? What is the total cost to serve each customer — including... To read the complete article, login or sign-up using the form below.

 
 

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