# WORKSHEET #11: Customer Categories and Objectives

Note:
This worksheet draws on the results of customer data gathered using Analysis 2

and Analysis 66

. Please review these analyses for further information and context for the steps in this worksheet.

Step 1:

Calculate the expected profit, or the net present value, through the business cycle, of each customer the company serves today. See your results from Worksheet #5: Serving Customer Segments on the Size/Role Matrix.

Step 2:

Calculate the expected profit, or net present value, through the business cycle for each unknown customer. More specifically:

• For each unserved Very Large and Large customer the company does not serve today (or Large and Medium customer for companies ranked #3 or below in market share) use estimates by marketing, sales and finance staffs of likely prices, sales volumes and costs-to-serve the customer.

• For the Medium and Small customer segments on the Size/Role matrix use the average prices, volumes and costs-to-serve for each segment from the Worksheet #5: Serving Customer Segments on the Size/Role Matrix.

• For all segments of unserved customers on the Size/Role matrix, set minimum acceptable limits for the combination of price, sales volume and customer specific costs that would qualify a relationship in that segment as a Core or a Near-core relationship.

Step 3:

Use the calculations above to assign each current customer, each role position with each prospective Very Large and Large customer and each of the other positions on the Size/Role matrix to a profitability category (i.e. Core, Near-core and Non-core customer) based on their specific expected (for Very Large and Large customers) or average expected (for all other Size/Role segments) profitability.

Step 4:

Assign and review objectives for each current Very Large and Large customer, for each prospective Very Large and Large customer (or Large and Medium customer if the company conducting this analysis is ranked #3 or below in industry market share) and for each other segment on the Size/Role matrix.

Step 5:

Set priorities on the sales and marketing programs for each customer based on the sales and marketing cost per unit or dollar of new sales from Increase Use and Get-In, as well as per unit or dollar of volume retained with Stay In customers. Use the results of Analysis 27: Additional Approach Information to Separate Effects of Customer Growth and Company Volatility to help with this calculation.

Step 6:

Estimate the percentage that the totals of Core, Near-core and Non-core customer sales volumes represent in the total of the current company sales and of the total industry sales:

• Calculate the total industry Core customer sales as a percentage of total industry sales.

• Calculate the ratio of current and planned Core customer sales of the company to total industry Core customer sales.

Step 7:

Determine value or cost changes needed to improve the percentage of current or potential Core customer sales in the total company sales and in the total industry sales.