Introduction
ACR Supply Company, Inc., a wholesale distribution company founded in 1977, markets HVAC/R parts and supplies throughout North Carolina. The company also markets various specialty products throughout the southeast, currently operating out of 11 locations in North Carolina.
ACR’s executive team has long been active in leveraging technology to help their staff work more effectively and perform in a way that contributes to continuously increasing customer satisfaction. Their tech investment is also a factor in their growth. ACR is now producing over $40 million in annual sales.
Challenge
While a huge part of ACR’s current success can be attributed to their longstanding priority on understanding their customers, the leadership team aimed to modernize the way they collected, stored, and analyzed the information coming from their ERP system, and to combine that with what had been primarily tribal knowledge from the sales team describing customer behavior. Questions concerning which customers to focus on and where to invest their sales efforts required answers grounded in data and analytics. And while the company was aware of customer stratification conceptually, they needed a partner to put this proven methodology into practice.
Solution
ACR turned to its longtime business solutions partner and advisor, Earnest & Associates, for a resolution that was both intuitive in use and sophisticated in functionality. E&A implemented ProSales (also referred to as “Strat”), a proprietary tool the firm created to mirror the customer stratification methodology touted by the National Association of Wholesale Distributors (NAW).
With ProSales working in conjunction with ACR’s ERP system, the capture and analysis of critical customer insights began to transform the business. It not only enhanced ACR’s responsiveness in providing exceptional customer satisfaction, it also resulted in timely strategies to nurture marginal customers into profitable ones. As a result, ACR has significantly grown both its customers’ top line revenue generation and contribution margins at an accelerated rate. Advancements were made across the board, including:
- A holistic valuation of customers based on sound business logic and theory
- Focused guidance on the sales strategies and plans needed for customers of different stratification categories
- A path to properly manage less-than-profitable customers
- A focus on customer relationship best practices
- An intelligent, planned balance between gross profit and total cost-to-serve
- Improved pricing decisions
- A simple framework that is easy to run, update, and maintain
- Seamless operation with their existing ERP and tech stack
With ProSales, ACR finally had a framework for building intelligent customer profiles which centered around four main stratification categories based on net profitability and customer lifetime value:
- Core: High net profitability and high customer lifetime value
- Service drain: Low net profitability and high customer lifetime value
- Opportunistic: High net profitability, low customer lifetime value
- Marginal: Low net profitability and low customer lifetime value
The stratification categories help ACR determine how to work with each customer. And the underlying data that leads to a customer’s categorization can be monitored to see progress toward moving them to a more profitable category or to maintain their assignment when it’s favorable.
Results
Customer stratification as a discipline, and the ProSales tool E&A built to develop and maintain it, made a significant difference in how well the company understood their customers. After seeing such dramatic results operationally, ACR began leveraging ProSales to provide insight into how it could more effectively align the deployment of sales assets and variable compensation to accomplishing their corporate goals.
Aligning variable compensation plans with overall corporate goals in a defensible and material way was a game changer for ACR. Salespeople now use ProSales every day to guide their interactions with customers and to form strategies to nurture and grow their customers’ bottom line contribution to ACR’s success. ProSales has become a big part of the extraordinary growth ACR has experienced.
Rodney Smith, Director of Sales at ACR, explains it this way, “It has upped everyone’s game to do what’s right for the business. We’ve broadened our scope beyond tracking sales. Now we understand all the other factors that contribute to our profitability and we understand trends and spot them early.” Not only has ACR reaped the benefits of ProSales, so have ACR’s customers. Utilizing insights from ProSales, ACR holds annual business reviews with key customers in which they share data and analysis from ProSales.
“Customers love the Business Review because they often don’t have the metrics we present to them,” says Smith. “Many of the things that drive our costs to serve them also cost them money, and we work together to find solutions to our mutual benefit. Our customers are very loyal to us and they tell others about the benefits of the Business Reviews.”
Overall, ACR has been impressed with how sales and business goals have become so well-aligned. They like the fact that ProSales is a daily tool for the sales team, not just a black box that executive management uses. Executives like the fact that they can understand and influence what the sales team members are doing to help grow the company.
The icing on the cake? After all of the initial skepticism the sales team felt around implementing a new tool, they are now ProSales’ biggest champions. And their individual success is proof of how much more effective ProSales has made their efforts.
