On Dec.9th, Burt Robertson and Dan Yaun attended a seminar on Managing your Business for Profitablility hosted by our accountants Vanacore, DeBenedictus and DiGovanni and Weddell from Newburgh. During the discussion the topic of customer profitability came up and we mentioned that we had implemented a customer segmentation program in August 2001 and were quite happy with it. No one likes to say "no" to business but there comes a time when it is better to do without than to continue to provide a service to customers that is not profitable or appreciated.
We said that for us to remain profitable we needed to have a minimum of $7000 a year worth of business from a customer to offer the service of free delivery. We know that a typical trades person buys a minimum of $30,000 of materials for each truck that he has on the road each year. To ask that a person give you $140.00 a week or $35.00/week in Gross Profit before expenses was not asking a for an exorbitant commitment to keep the materials flowing. In retrospect that figure was probably too low but it was a starting point.
We received the indignant calls from people who said that they would never darken our door and that my grandfather (long since dead) would be turning over in his grave. However, we held to our own counsel and took flack from our competitors (who wish that they had the fortitude to try it.) The point was that some of the customers left us for a while and then came back while giving us more business than they had ever given us. We did lose a few and were sorry to see them go. Overall our communication with our customers opened up a dialog with many people who evaluated their needs and saw that we carried the materials for mechanical and electrical work that they could use and said that we were worth it. Some took a year or more to get back into the "Yaun Habit" but in fact we are stronger now because of the increased dialog that we have with our marginal customers.
We had the opportunity to find out what our customers needed and how we could fit into their plans and make them profitable for us and themselves. We found out our strengths and our weaknesses that we needed to work on. All in all, the $25.00 delivery charge for orders under $250.00 to a non-Premier (or non Platinum) Customer (less than $7000.00) was exactly what was needed and we have no hesitation as to whether or not it was the right decision for us. Communication is a good thing. And managing your assets is management. Sometimes we all should take a look at what we are doing and ask is it profitable for us. If the answer is no, then we need to look to changing it.