Are you Serving Whales or Minnows?
March 22, 2016
Which of your customers are “whales” and which are “minnows”? Once you figure that out, you’re on the road to increased company profit and growth, speaker Peter Philippi of Strategex told PHCC’s Construction Contractors’ Alliance (CCA) members recently at a meeting in Atlanta, Georgia.
Applying a business management rule that 80 percent of your revenue comes from 20 percent of your customers, Philippi encouraged CCA members to conduct a complete analysis of the value each client brings to the business. The results, Philippi said, can be shocking. “You may find that you are overserving the minnows … customers that are bringing in very little revenue, and underserving the whales … those providing the most revenue,” he said.
What are the next steps? Here are a few that Philippi recommended:
- Split your customers into these categories: whales (high volume), baby whales and minnows
- Overserve the whales and treat them differently
- Concentrate on moving the baby whales to whales
- Change the terms of business for the minnows
- Focus on the facts, not emotions
- And remember: “Minnows do not grow into whales no matter how much you feed them.”
Also, at the meeting, Ryan Doupe, Ferguson’s Director of Market Research and Market Intelligence, presented an Industry Update based on information compiled regularly by Ferguson. While factors like the economic situation in China and the decline in the oil and gas industry have had a big impact on the United States, the nation’s economy overall is doing well, Doupe said. A recession in 2016 is unlikely; in fact, The Wall Street Journal recently identified the 2016 recession odds as 17 percent. Doupe also pointed to some of the strengths in the economy, such as strong job growth, a declining unemployment rate, high consumer confidence, and a service sector that is currently performing well.
Looking ahead, Doupe predicts the residential segment will continue to be strong, with multi-family housing activity currently close to a peak and single-family housing starts beginning to increase. Commercial construction is strong right now, but will be weakening over the next couple of years. Remodeling will remain solid.
The overall home ownership rate now is at 63.8 percent; it previously was 69.2 percent toward the end of 2004. Doupe shared two main factors for this: foreclosed homeowners who were forced out of the market during the recession cannot obtain credit, and younger potential homeowners are not in a position to buy because they are saddled with college debt. Also, younger buyers are currently more interested in renting units in urban settings because of the amenities offered—close to retail, entertainment, parks, public transportation, etc.
While a slight recession could be three years away, Doupe encouraged CCA members to get their businesses ready now for any possible future downturn. He also shared ideas with CCA members about how to bring more skilled workers into the industry, which faces a daunting labor shortage. To help in that effort, Ferguson currently supports PHCC and PHCC Educational Foundation education, training and scholarship programs.
Along with the education sessions and networking activities during the semi-annual meeting, CCA members also toured Atlanta residential construction jobsites, visited CCA member company Miller Mechanical Contractors and Engineers’ office in Marietta, Georgia, and shared business solutions and ideas in several roundtable discussions.
The next CCA meeting is tentatively planned for September 2016 in Boston, Massachusetts.