I see it quite often this poor problem management in B2B: instead of tackling the problems, companies prefer to serve their A and B customers first, at the expense of the C ones.
A, B and C customers refer to ABC portfolio analysis, a Pareto chart approach of customer base in which customers are sorted according to generated turnover, order quantities, strategic importance or any chosen parameter.
- A class customers are those, usually few ones, accumulating 80% of the given parameter, let’s say turnover.
- B class are the next 15%, a range of customers bringing all together 15% of turnover.
- C class are the reminders, many customers with small orders accumulating 5% of turnover.
According to Pareto law, AKA 20/80, 20% of the customers will account for 80% of turnover and these essential fees are the favored category for obvious financial reasons.
On the other end, the “trivial many” of C category require more attention because of placing numerous small and often specific orders, for a tiny portion of the global turnover.
When companies face problems satisfying all demand, they usually “trim the tail” or ignore some of the least significant customers in order to favor the most significant ones.
Doing that, those companies:
- Disregard their C customers
- Make a gift to competition
- Simplify their problem, not their solution
Disregard their C customers
There seems to be sound rationale behind the choice of trimming the Pareto’s tail, yet some of these sacrificed C customers may be new ones testing their potential new supplier. These Cs could have turned As if not sacrificed a bit hastily, based on (too?) simple, questionable selection process.
It may not hurt ethics beyond not keeping a sales promise when it is about widgets, commodities and the like, but what when the supplies are medical devices or drugs direly needed by every customer?
C customers may be emerging or poor countries with little choice of suppliers but people to treat.
Besides, these C customers have been acquired at some moment, could even have been welcome when sales were needed. It is a kind of unfair to disregard them when unable to supply all customers.
Make a gift to competition
Treating C customers with disdain may make them turn toward competitors, which is a free gift to the latter.
Given the costs of acquisitions, which is not only counted in money, companies in trouble supplying their customers should work out a solution to satisfy each and every one of them instead of just throwing a part into the arms of the opponents.
Simplify their problem, not their solution
Just cutting off supplies to C customers simplifies the supplier’s problem, not the solution.
In other words, it does not address the root cause, it just seem to alleviate the pain but at potential very high (future) cost: the loss of customers.
The only situation where this temporary solution – stopping supplying C customers – is “acceptable” is when it helps stabilizing a chaotic situation in order to work out a solution to supply ALL the customers. It has to be of short duration and preferably prepared and backed-up by adequate communication.
Turning off the tap without notice, hopping customers won’t claim is just unacceptable, unprofessional and unethical.
Yet all this being said, how many managers really care?