Your low hanging fruit may be rotten.

How do you know if the prospect you are chasing is worth the race? Is it the total revenue potential long-term? Is it the quick revenue burst to offset a big bogie number? Is that they may be a loss leader know but has the chance to be an elephant later? There are literally dozens of excuses to try and convert the sale. But there should only be one fundamental metric to use – customer profitability. The smarter question in the beginning is if this customer will make a positive impact on your bottom line? The mystery is how a company knows if they will be profitable or not while the prospect has yet to convert to a revenue generating customer. Unless one has a magic ball, it is almost impossible to know. Let’s face, it. This has been puzzling sales managers and executives for years (then again they get compensated on revenue and/or units sold, not whether they will be profitable or not). Demystifying the question: It answer is quite simple. Evaluate your existing base of customers, identify which ones positively impact the profitability, get a 360 view of them, and overlay that with your prospecting database. This is called predictability. And while it may not be 100% accurate all the time, it is most likely the smartest, most effective way to know the trend. If the prospect has the same archetype and profile of your best customer, then your fruit is probably healthy. If not, you run the risk of getting a bad apple. Why spend company resources to try and convert a customer that will adversely affect the bottom line? Now that would bite.

Does the answer sound simple? It is in theory, but in practice, most companies don’t strategies surrounding Customer Economics. A bit scary, indeed. Unless you have the proper customer data, getting to the answer could be challenging indeed or worse, impossible. Customer data usually sits right in your financial system – who, when, how much, and what they purchased. And if they continue to buy more and more, that information sits in there too. It doesn’t take a brain surgeon to start to build out a model that can start to track conversion, profitability, churn, attrition, value and a host of other segmentations. Customer Economics is currently one of the single most important measurements of success today. Points of view on how issues facing marketing people, how to get started, or the value of such from a shareholders perspective are starting to get the attention of senior executives. We suggest getting your best practices started today. You never know if the Board of Directors, or even the Government (yikes!) starts making this part of the compliance process.