How Can Customer Segmentation Help Your Wholesale Distribution Business?

We all want to be treated fairly and be sure our customers are treated fairly while maximizing every customer’s contribution to your business. Many Wholesale Distributors tend to treat all customers the same, not recognizing that some customers are looking for value added services to help them lower their cost of doing business. Some of your customers don’t appreciate, nor do they require these services. This distinction begins to make the case for segmenting your customers. 

In the past, one of our customers was very reluctant about charging a 5% restocking fee for returned goods. They eventually rolled out the charge to all but their best customers (who by the way, rarely returned any goods!) and lost no business. This fee is only charged to their “B” and “C” customers and never charged to their “A” customer segment.  Your ERP solution should be able to provide these metrics. A solution like Microsoft Dynamics GP provides built-in Business Intelligence by leveraging Microsoft’s SQL Server Reporting Services.

To get the answers to these questions will require you to analyze the data from your customer’s orders. It also may require you to begin a conversation with your customers to find out what they are expecting.  Then you will know who your best customers are and maybe your least profitable customers as well! You may also know which products are fast movers and which ones are not so fast.

Customer Service is often a “cornerstone” upon which the business has been built and every employee takes pride in making certain every customer receives the same service levels and often the same price for products and additional special services.

In order to reduce costs and keep all customers happy, the Wholesaler needs to begin to segment his customers and better determine service levels for each segment.  This concept can help the Wholesaler reduce costs in areas where he might over-serve one group of customers and under-serve another, thus providing one customer segment with unappreciated services or potentially losing valuable customers in under-serving another group of customers.

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