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Distributorship Pares Account BASE
IMR, May 13, 1996
John Read is trying to get rid of business. That's right, get rid of business. Read, CEO of Combined Graphics Corp., a distributorship in Northbrook, Ill., has set up a 3-tier strategy for weeding out unprofitable or undesirable accounts. Read says this is particularly necessary given the niche he serves. Combined Graphics sells prepaid telephone calling cards to about 60 clients, half of whom place orders monthly. About 75 percent of the time, these aren't repeat orders. Customers want new graphics on the promotional cards.
"We're buried, but a lot of the work is busywork. We're not getting the return on it," says Read, who says two or three employees are constantly handling typesetting and prepress tasks. As part of his 3-tier strategy, Read is adjusting his company's pricing, product offering and client list. First, Read set a minimum profit. "If we can't make at least $250, we won't take the job," he says. Next, Read instituted a minimum quantity policy. Clients pay significantly more for orders less than 5,000 paper or plastic cards.
Combined Graphics sends binders promoting telephone calling cards to customers and prospects. Read says there were too many choices mentioned in the binders, from varying card materials to coatings. Although his company will supply any card a client asks for, Read reduced options in the binder by 30 percent, thereby reducing the variety of orders his company receives. "By standardizing our offerings, we are able to move orders more quickly," says Read.
Combined Graphics has met success selling telephone calling cards to large companies, such as Enterprise Rent-A-Car, MCI Communications and Walgreen's. The distributorship is paring its customer list by shying away from small customers, particularly those that place small orders. One of its strategies is to set stricter credit terms for smaller customers.
Read hopes these streamlining strategies will help the company run more smoothly and improve profitability. "The enemy of your best accounts is sometimes your good accounts," he says. "You can take in so much average work that you don't have the time necessary for your best customers."