Low Cost Sales Channels

Last week, I wrote about using different sales channels to find better customers. I mentioned that it might  be a good idea to figure out which customers are the most costly to serve and the least profitable, and direct them to lower-cost channels.

This is only part of the story.

Adjust customer channels to find the right balance
of profitability. Photo: Flickr user Dustin.Askins.

Just because a customer is expensive to serve, doesn't mean that customer is the least valuable. In fact, customers who require a lot of time, energy, and money can certainly be very profitable customers.

The key, then, is aligning client profitability with the appropriate channel, or balancing profitability across channels.

How does this work?

I used to work for a large company that served customers in several different ways. There were low cost channels and high cost channels, and I think we did a pretty good job of aligning customers accordingly.

Our low-cost channels included web sales and telesales. It was inexpensive for our company to do business online and via our call centers, so, where possible, most customers were directed to one of these channels - "Just call or click," we'd say.

Our retail stores were medium-cost, because we were able to effectively bring in new customers this way, and sell them lots of profitable add-ons. Once we had these customers in the fold, they were encouraged to deal with their bills and any additional service they needed via lower-cost channels like web and telephone. In this way, we balanced channels so that high-value sales, like signing up for new service and purchasing equipment and accessories could happen in-store, and lower value activities, like address changes and billing questions, could be directed to lower-cost channels while still providing customers with great service.

Our highest-cost channels were what we referred to as "National Accounts." This included a sales force who called on businesses with multiple customers in-house. While it was expensive for us to maintain this sales force, provide them with the right equipment and tools, and send them all over their territories to meet with customers in-person, it was still profitable for us to serve customers this way since these were very high-value customers that provided a high rate of annual revenue.

So, what's the moral of the story?

Take a look at your channels, and make sure you're putting your energy in the right place. There's nothing wrong with a high-cost channel as long as you're getting a return on your investment.

How do you balance across channels and where are you realizing economies of scale? Need help doing this?  Let me know.

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