Knowledge loss. It’s the shared risk that companies grapple with as they undergo the normal ebb and flow of employee churn, leadership exit plans, and even staff reduction or layoffs. The pandemic environment–and the Great Resignation that followed–taught us many lessons about knowledge loss. According to Gartner,
- 73% of CEOs experience a shortage of skills and knowledge that disrupt their business
- 51% report that retaining talent is one of their biggest challenges
The cost of knowledge loss that results from employee turnover includes:
- Damage to reputation
- Damage to relationships
- Loss of productivity
- Higher rehiring costs
- Increased training costs for new employees
- Less innovation
- Reduced morale
Gartner warns that to avoid knowledge loss, business leaders need to capture both explicit and tacit knowledge. Explicit knowledge exists in standard business systems like data files and CRM systems. Tacit knowledge is the information that has been accumulated through experience–such as a sales executive’s intricate intel on each of their customers–and isn’t housed or documented in a centralized place.
For that reason, tacit knowledge is the most difficult to capture. Critical insights reside within people rather than a technology, and the transfer of such knowledge is less formulated and less reliable than knowledge gained from reviewing formalized reports, for example.
And, when it comes to understanding customers–their behavior and their true impact on your bottom line–tacit knowledge plays such a strategic and powerful role that figuring out how to capture and retain this knowledge is non-negotiable.
Enter customer strat.
What is Customer Stratification?
The customer stratification framework was developed and promulgated by the Council for Research on Distributor Best Practice (CRDP), an alliance between the National Association of Wholesaler-Distributors, and Texas A&M University’s Industrial Distribution Program. Customer strat is essentially the identification of customer ranking categories and assignment of customers to an appropriate category, making it easier and more efficient to offer the best level of pricing, support, products, and opportunities to move up in the ranking to your mutual benefit.
Using this framework, you can:
- Rank customers against each other based on how they contribute to your business.
- Devise strategies specific to each type of customer and manage customer relationships.
- Strengthen pricing and inventory investment to maximize revenue and profit growth.
- Improve the ROI on inventory and sales assets.
- Continuously ensure that customers receive the highest level of service and fulfillment and mitigating the risk of customer defection.
What Are the Benefits of Customer Stratification?
Customer stratification gives you the ability to assess the strength and alignment of your customer relationships with revenue and earning goals and the cost structures in place to maintain those relationships. Customer stratification allows you to see the relationships between your customer relationships and their impact on:
- Growing revenues
- Reducing sales, support and service cost in real numbers and as a percentage of sales
- Growing your return on investment
- Driving greater efficiency in sales asset allocation
- Avoiding knowledge loss
Gathering data about customers’ buying habits can offer interesting charts and graphs. However, it’s critical to turn that data into information to reap the benefits customer stratification provides. And, the beauty of customer stratification is that the entire framework is stored online and available to the entire organization.
- You can prevent the knowledge loss that happens when any employee who holds a deep and tenured understanding of each customer type leaves or retires. Customer stratification technology institutionalizes that knowledge and makes it accessible to anyone.
- Onboarding new employees becomes much easier. The new employee doesn’t need to guess how they should approach the customers in their territory. They have a history of each customer’s evolution, where they rank in the customer stratification framework, and whether the customer is willing to work with the company to move to the highest ranking to acquire better pricing and service.
E&A helps clients to avoid knowledge loss with two technologies that turn off-the-shelf ERP products into powerful workhorses customized to address the intricacies of your business. ProAdvisor is a business performance management tool that supports exceptional information-driven decision making, and ProSales is a full-featured customer stratification system.
