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And now a word on profitability

BY HBSDealer Staff

Phoenix — Not all customers are created equal. The trick of advanced analytics, as revealed during a presentation here at the ProDealer Industry Summit, is to identify which customers are profitable, and which are a drain on the business.

It’s easier said than done. But knowledge is power when attempting to boost profitability.

Jason Niemi and Jason Bolstad, co-founders of Building Results CRM, a DMSI product, pointed to statistics that showed 60% of your customers make up 160% of your profits. Simply put, the key to customer relationship management involves identifying those profitable customers.

The first step to successful analytics is understanding the cost of services provided, including allocations that could be contentious within a company. “It doesn’t have to perfect, but just get it close,” Bolstad said.

A customer net profitability report can show which customers are adding to the bottom line, and which are detracting from it. According to Niemi and Bolstad, a systematic approach to improving profitability involves organizing customers into four categories:

  • Core — high gross-margin, loyal customers
  • Opportunistic — similar to core, but less sales volume
  • Marginal — not high volume, not costly to serve, but candidates to slip into the unprofitable category
  • Drain — high-cost of service and unprofitable

Identifying the type of customer is only the beginning. The key is to move the customers into the profitable categories, and out of the drain category — even if it means cutting them loose. And the big question remains how do you handle customers in the drain category.

He offered a couple of suggestions involving customer communications. One is to be more clear with return policies. Another is to be honest with the customer about the details of its status as a drain. “I would recommend: don’t be afraid to be very honest,” Niemi said.

With customers identified in segments, a company can concentrate on converting the opportunistic category to a core category.

And there’s also advice for how to treat those customers who are already in the profitable core category.

“Study them,” Niemi said. “What are the behaviors between you and these customers that allow you to make money. And also study them as a company, what makes them a great partner?”

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Houzz Stat: How long does building permit approval take?

BY Erin Carlyle, Houzz

Less than a month is common. The remainder of permits (76 percent) require multiple days for approval. Of those, most (83 percent for first-time applicants, 77 percent for experienced) take less than a month to obtain. Notably, a greater share of experienced applicants (10 percent) had building permit approval take four or more months, while only 3 percent of first-timers faced that timeline.

“Homeowners who have gone through a permit process once before may be more willing to embark on projects with greater structural or design complexities than first-time applicants,” says Nino Sitchinava, Houzz’s principal economist. “As a result of these complexities, the application review process may extend beyond typical ranges to include additional review cycles by planning, zoning, public works or other local commissions.”

See more survey results here.

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Housing starts slip in September

BY HBSDealer Staff

As extreme weather and hurricanes slowed construction in the South, housing starts slipped in September. Starts in September were at a seasonally adjusted annual rate of 1,127,000, down 4.7% from the previous month, according to data released Wednesday morning by the U.S. Census Bureau.

The single-family story was also heading in the wrong direction  – down 4.6% to a rate of 829,000. Building

The year-over-year story was positive – total housing starts increased 6.1% compared to September 2016, when the rate was 1,062,000.

Measures of building permits were more negative than positive. Total permits in September came in at a rate of 1,215,000, down 4.5% from August and down 4.3% from September 2016. Single-family authorizations were up 2.4% to a rate of 219,000.

On a regional basis, Census revealed the following data about September starts:

Going down:
• South: 1-unit down 15.3% compared to August 2017;
• Midwest: total starts down 20.2% compared to August 2017;

Going up:
• West: 1-unit up 26.1% compared to September 2016;
• Northeast: 1-unit up 17.7% compared to September 2016.

For the full Census report, click here.

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