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Are Your Key Corporate Assets Safe?

Are your Key Corporate Assets Safe?

Treating Strategic Accounts as Corporate Assets

The conventional wisdom: 

“Corporate assets include people, property, plant, equipment and intellectual property, such as patents, copyrights and  trademarks.”

The reality: 

“In addition to traditional corporate assets like people, property, plant, and equipment, one of the biggest — and often overlooked — assets of a company is its strategic customer accounts.”

Case Study: The defection of a key customer is every executive’s nightmare

Several years ago, Brothers Gourmet Coffees Inc., based in Boca Raton, Florida, saw its annual coffee production plummet from nine million pounds to 300,000 pounds, virtually overnight. The  reason? Proctor & Gamble, which had  been its  largest customer, decided to move production in-house,  leaving  Brothers in  the lurch. As a result,  the  coffee  wholesaler  had  to  shut its  manufacturing  plant  in  Houston,  which  had  been in operation since the late 1950’s.

Given all the dangers of losing a key customer, it’s amazing how little attention many companies pay to keeping their major accounts. Amazingly, some firms sometimes realize they’re in trouble only after a big customer has already switched   to a competitor. Part of the problem is educational. When business schools teach students how to manage corporate assets, the subject never includes arguably the biggest asset of any company – its customer base.

The general rule of thumb used in many markets is that the cost of acquiring  a new customer is five times that of retaining an existing one. But in some industries, that cost can be much higher.

For those and other reasons, customer turnover, or “churn,” is a huge issue in many industries. In particular, it plagues many consumer markets, including financial services; insurance; cable, direct TV and Internet services; magazine publishing; and so on. In banking, for example, one estimate is that the average annual defection rate is 12.5 percent.

Not Created Equal

In today’s world, all customers aren’t equal. The well- known adage is that 80 percent of a company’s business might come from just 20 percent of its customers. For some firms, the breakdown might be 70/30 or 90/10 instead of 80/20, but the point is that a minority of your customers will usually account for a proportionately larger fraction of your revenues. Moreover, just a handful of customers might be absolutely essential for your success; those firms are your “strategic” accounts.

So what can I do about it?  

Download the rest of Bob Miller’s interesting article and read on……….. and then why not get in touch with us to discuss how to protect your Strategic Accounts. Contact us

 

 

 

 

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