Four Ways to Uncover More Profit with Existing Clients (Path to Profit Series, Part 3)
To increase your profit, you can’t merely hope your customers spend more. Hope is not a business plan. Warren Buffett said the investor of today does not profit from yesterday’s growth, and the same can be said for the salesperson. You can’t rely on last year’s spending to become your roadmap for sales. Each year is a new year with your customers, every budget, a new budget. To grow, you must be proactive and keep your opportunity pipeline full.
We kicked off a new series, “The Path to Profit” by highlighting Four Keys to Focusing on the Most Profitable Clients and in today’s post, we’re exploring how to uncover additional profit opportunities that exist within your current book of business. The following are four ways that you can chart a path of profitable growth with your current clients:
#1: Explore Opportunities with a Discovery Call
Uncovering future profit opportunities takes just a little planning, and a discovery call is a perfect way to do this. What’s a discovery call? A biannual visit (once every six months) with a key client intended to discover opportunities ahead. This is the time to go over your customer’s calendar for upcoming projects, as well as review what challenges they are facing, so you can be proactive with sales, rather than always reactive. If you do not understand what your client’s problems are, you are not providing value. A discovery call benefits the client as they can share with you what is on their mind and what success looks like in the next six months. Plus, your proactive work gives them peace of mind that you will be on the ball for the most critical projects they have coming up. It benefits you in that you can be more strategic, using the luxury of time to come up with better ideas that will truly solve the client's challenges, rather than always being reactive.
Better ideas translate directly to a better margin. It also gives your calendar a little relief from all of those last-minute requests. One fringe benefit: context. We once had a customer who set up a meeting every six-months just to review problems. I realized this could become nothing but a gripe session if the only thing we did was talk about problems, so we provided context. When the Vice President began her review of the three problems they wanted to be addressed, we responded by sharing the success of over 130 transactions in that time. The juxtaposition of the 3 problem transactions against the 127 successful ones, made her realize the problems were not as significant as she thought.
A six-month review will help you pause and celebrate successes, help you learn about your client’s problems, and strategize your way to discovering opportunities and increasing profit. Most customers are reluctant to set up a regular meeting due to their harassed schedules so, how do you make them eager to see you? See point #2.
#2: “Spec Samples Sell” (But You’re Not Doing it Right)
Most promotional products salespeople, even the successful ones, rarely take advantage of spec samples, and even those that do, use specs incorrectly. Your discovery calls are ideal places to find the perfect spec sample opportunity.
In this industry “What’s new?” is the most popular phrase uttered at an industry trade show, but it’s not the right question. The right question for any customer project is “What works?”
It’s simple supply and demand. Supply represents what the market has to offer (in this case, what a supplier has to offer, such as a new product) but the demand side of the business -where the customer lives and where the bigger margin opportunities hide- is what the customer is seeking. Rather than relying only on a supplier’s newest ideas for spec samples, you should be using your customer's calendar -their upcoming needs- to match the perfect idea with the perfect opportunity.
Often, an excellent spec sample will go unused on a customer’s desk, “it’s cool,” they think, but they have no use for it. Suppliers themselves get fatigued by distributors who abuse spec samples in this way. The number one misuse of specs is to not match supply (free spec) with demand (customer need). Your biannual discovery calls should be a celebration of your successes, an inspirational showcase of merchandise, and a great place to uncover those spec samples opportunities. How to make a customer want to take the time to meet with you? Simple. Use the power of our medium as a way to incent the customer to make time. Use higher-end gifts (self-promos), exclusively tailored for each customer, as a way to say “thank you” for taking the time to visit. In time, through your discovery visits, you will train the customer to expect spec samples that are on-target for their needs, and you will create a small, celebratory party with your clients, changing the atmosphere of one from selling (convincing someone to buy something they don’t want) to inspiring your customer with creative ideas, while using the best part of our medium (advertising that people thank you for) as a way to have fun and make them hungry for more! Have a client who refuses to meet in-person every six months? No problem! Send them a care package with your specs and self-promos and have your meeting over Skype or a Google Hangout.
#3: Target Higher Margin Categories
There are certain categories in the promotional products business that are commodity priced, like inexpensive pens or mugs. These categories are restricted in their margin opportunity due to market value and catalog pricing. But there are plenty of categories in the industry that exceed “market value.” Higher profit opportunities exist in custom opportunities, like custom apparel (such as hats and toques), and custom awards programs. These projects typically take a little more work but yield significant residual dividends through repeat orders. How many, pure custom orders, have you done for your best clients in the past year? Two other categories, packaging and kitting, are hidden opportunities for massive profit. With custom packaging, you are creating a one-of-a-kind experience, an opportunity to flex your artistic strength on a blank canvas. With kitting, you are providing a highly valued service that the client cannot (or does not want to) do themselves, which represents a huge profit opportunity. And the real kicker is: kitting projects are very difficult to shop and compare. Both kitting and custom packaging represent not only add-on sales for more profit, but they also elevate your strategic value to the customer.
#4: Sustained but Small Margin Increases Over Time
The fourth area (and one my of my favorites) is sustained, small margin increases over time. We once had a customer who leaned on us to advertise through one of their channels. The advertising opportunity didn’t make sense for us, but they were so insistent, we knew it was risky to say no. Instead of saying no, we agreed to the advertising expense and raised our margins on all future projects by a few percentage points. Over the course of a year, a $250,000 account at 38% margins, increase by two points, results in an additional $5,000 in profit. The customer not only paid for their own advertising expense, but we made a little money along the way. The industry is so deadline-driven, so reactive, that we rarely take the time to think of the impact of a simple 1% increase on margins. If a $1,000,000 distributor, with 38% margins increases their average margin to all customers by 1%, the net result would be an additional $10,000 on the bottom line. That’s free money! Caryn Kopp, Chief Door Opener at Kopp Consulting, whose workshop “Path to the Cash, Find Revenue Faster,” will be featured at our skucamp event in New Orleans, spoke with us on a recent podcast episode. Caryn has consulted within our industry and knows the challenges and opportunities, here’s her take on the fastest way to grow sales (3 min):
Most of the significant profit opportunities with a client hide within custom, proactive tasks that require just a little bit of preplanning and foresight. But the most experienced pros in the business know that these pockets of opportunity yield more than just margin, they are a chance to learn more about your customer’s real problems and provide custom solutions that increase your value and drive significant profit.
This post is the second installment in our series, The Path to Profit. Review our intro post: The Real Business of Winning, here, and our subsequent post, 4 Keys to Focusing on the Most Profitable Clients.