ABC-SPC Framework

I guess I used to take it for granted that everyone in business stratified their customers into different categories based on their value (and pipeline stage) to the business to help them prioritize their limited resources when choosing how and where to spend their time – and also to identify where to spend their time growing their businesses.

Pipeline Funnel in RedThe first stratification would be by existing customer categories.  The most common categories I have run into are A, B, C.  Some larger organizations I have talked with add to C (or replace C) with ROW – Rest of World.  I am a bigger fan of setting up more strict definitions and criteria for A, B, C and keeping it as simple as possible so that a vocabulary between employees and in tracking systems can be established and used to communicate information consistently and accurately for decision making.

A:  These are the customers that have been identified as REALLY important to the business.  They may be strategic, highly profitable, well connected, influential, long standing, or other aspects that justify going way above and beyond – an extra mile or two or ten.  Because of the commitment from and to A customers, there are a limited number of customers that can practically be called and serviced as A customers.

B: These are the customers that are good for the business and likely make up a large portion of the customer base.  They are generally good customers and contribute to the viability of the business.  These customers you would go extra steps for – but not necessarily an extra mile.  Because of the more balanced commitment from and to B customers, a greater number of customers can be called and serviced as B customers.

C: These are the customers that are neither A nor B. 😉   If the customer base is made up of C customers, there are likely going to be issues with sustainability and growth.  If there are a limited number of customers that a business can serve, the C group is a great place to replace customers with new A’s and B’s.  Because of the typically imbalanced return from C customers compared to the effort to service C customers, there are a limited number of customers that can practically be sustained as C customers.  The goal would be to reduce the C’s to as small a number as possible while focusing growth in a balanced with with A’s and B’s.  Question I typically ask employees and staff – do you know which are the C customers?

Next let’s utilize a simple three stage framework of Suspect, Prospect, and Customer.  Briefly let me draw some bright red (ruby) lines:

Suspect: Someone who has been identified (by themselves, by your network, or by you) as a potential customer for your business but you don’t know much of anything about them to know if they are high or low potential.

Conversion to Prospect: You have made contact and they have expressed interest in knowing more about your offering(s).

Prospect: Someone who you have had interactions to validate some information about whether or not they could be a good customer.

Conversion to Customer: You have received “payment” from them in exchange for your product(s) or service(s).

Customer:  Someone who has “paid” your business for a product or service and would buy again.

Now if you construct a simple 3 by 3 matrix you can visualize the relative priority and stage of your entire “customer” portfolio and pipeline.

Suspect, A Prospect, A Customer, A
Suspect, B Prospect, B Customer, B
Suspect, C Prospect, C Customer, C

We can use this framework for other discussions.

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