Playing Favorites

It's tempting to feel grateful for every customer you have. You should fight that feeling.

Providing close-to-the-market data can also create a bond. In consumer electronics — or, for that matter, any product with a short life-cycle — a supplier can be a valuable source of information about when the item’s profits have begun eroding, suggesting that shipping should be winding down. Such data is more valuable than ever, given the pressures on margins. “Customers are going to be receptive to help now because they are under so much financial pressure,” says Byrnes. But before you shift any resources in their direction, try to look beyond the data, assessing their overall strategy and sizing up their leadership team. They may be profitable for you now, but what are their prospects? “In this economy, we are being very cautious about who we develop relationships with,” says Linda Booker, CFO of IDI, a $2 billion commercial-real-estate developer in Atlanta. “Before we work with anyone, we’re paying utmost attention to their balance sheet. We ask them about their relationship with their bank, what debt is maturing over the next five years; we explore their ability to refinance. We’re extra-careful.”

Relationships Take Work

CFOs have to be extra-careful too, monitoring the performance of the company’s “portfolio of customers” on a regular basis, says Selden. If that sounds like a lot of work — well, it is. “This is not a trivial undertaking,” warns Selden. “But the fact that it’s really, really hard is great. Segmentation becomes a competitive weapon.” It just takes time. “This is a fundamental rethinking of a business,” says David Reibstein, a professor of marketing at the University of Pennsylvania’s Wharton School of Business. “We’re going to see more companies investing in this, finding out the value of their customers and paying more attention to some of them.” The ultimate goal: to have more value-laden relationships with fewer customers. Not that any company will execute with 100 percent accuracy. “The truth is,” says Bund, “you never know as much as you want to know.”

But you may soon come to know a lot more than your competitors do.

Josh Hyatt is a contributing editor of CFO.

Discuss

Your email address will not be published. Required fields are marked *