Happy customers, but unhappy shareholders
Hillfoot Steel is a long established engineering steel stockholder with a long tradition of excellent customer service. In 2001 they had over 1500 customers, but their stockholding division was losing £500,000 per year.
Of those 1500 customers, over half were not generating an economic profit (operating profit after deductions for capital employed two fifths accounted for less than 1% of turnover, and more alarmingly 82% of the divisions profit was generated by just 10 customers.
As Marketing Manager, my task was to work with the sales team to identify why we were profitable with some customers and not others, what added value services we could provide for our profitable customers, and how we might identify new, profitable opportunities elsewhere.
We did this by adopting a sector driven approach. Hillfoot's traditions customer service had been at the expense of a business strategy. We bent over backwards for everyone, and tried to be all things to all people, doing whatever it took to win the business. We had no firm proposition or point of difference.
Of those 1500 customers, over half were not generating an economic profit (operating profit after deductions for capital employed two fifths accounted for less than 1% of turnover, and more alarmingly 82% of the divisions profit was generated by just 10 customers.
As Marketing Manager, my task was to work with the sales team to identify why we were profitable with some customers and not others, what added value services we could provide for our profitable customers, and how we might identify new, profitable opportunities elsewhere.
We did this by adopting a sector driven approach. Hillfoot's traditions customer service had been at the expense of a business strategy. We bent over backwards for everyone, and tried to be all things to all people, doing whatever it took to win the business. We had no firm proposition or point of difference.
