Bruce Merrifield, President — Merrifield Consulting
•WayPoint Analytics •sales practices •profit strategy •profit war stories •Randy MacLean •wholesale distribution •Bruce Merrifield •Merrifield Consulting •sales tactics •taking action with customers •money-losing customers
Wednesday, May 14, 2014—From time to time, we run into what my friend and colleague Bruce Merrifield considers to be "cherry pickers". I think everybody has them, where you have people that are not profitable, and when you look at what they're buying, the items are probably not popular or profitable either.
"To frame them as a general category," Bruce adds, "when we do our customer profitability ranking reports, we see some big names that we thought were good customers, prestigious customers, and they're losing money." One possible story is that it might be "a customer who is ordering roughly $20 of stuff every single business day of the year — so maybe let's just say there's a $10 margin. You've got a $100 transaction charge roughly, and so you're losing $90. Multiply that times 250, and you're losing twenty grand. Then, when we look at the SKUs, we see there are 250 different SKUs that this customer is ordering, and they're all D items. These aren't the staples; they've got none of that. I look at it and say, this guy's a cherry picker!"
So what exactly is a cherry picker? Bruce defines it as a customer who gives all of his business to one supplier, possibly a friend or another long-standing relationship, then whatever he can't buy from him, he'll go to the next guy and try to buy those items there. It goes down the ladder until you're his last or next to last stop because you're the only one who sells what he needs.
"So you have a unique marketing proposition," Bruce explains. "You have a product he needs tomorrow to keep people busy, to keep the customers satisfied, and you're the only guy in the area that can deliver it. And you're going to take care of him for a $20,000 loss a year. Is this fair?"
The easiest way to identify a cherry picker is to ask your customer about his top suppliers. If he identifies a lot of personal connections with those suppliers, it's unlikely that the arrangement will change any time soon. If you've had him on contract because he could have possibly turned him into a big account, it might be time to take him off contract and impose minimum orders along with freight shipping to turn the account profitable.
It's not risky or dangerous to do these things; it just takes a little bit of courage to get outside the box to turn things into a win-win situation. Learn how to do this by watching the video above.
For more information about Bruce Merrifield, visit: www.merrifieldact2.com
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