Your Biggest Customers May Not Be Your Biggest Opportunities
By Larry Goddard and Jennifer Goddard
Most companies know exactly who their biggest customers are. Ask a CEO or head of sales to name the top ten, and they can usually do it without looking at a report. Those customers get attention. They get senior sales resources. They appear regularly in management meetings.
That makes sense.
But there's a question leadership teams ask far less often: Which customers represent our biggest growth opportunities? Those may not be the same customers.
Revenue Tells You Where You Are. Opportunity Tells You Where You Could Go.
Consider two customers.
Customer A
Current annual revenue: $2 million
Estimated relevant spend: $2.5 million
Your share: 80%
Remaining potential: $500,000
Customer B
Current annual revenue: $1 million
Estimated relevant spend: $4 million
Your share: 25%
Remaining potential: $3 million
If you rank customers by current revenue, Customer A appears twice as important. But if you're trying to determine where the next dollar of growth might come from, Customer B looks very different. It potentially represents six times as much uncaptured revenue.
That doesn't mean Customer B will buy another $3 million from you. Some of that potential may not be addressable, winnable or profitable. But it certainly deserves investigation.
Your biggest customer is a fact. Your biggest opportunity requires analysis.
Most Customer Reports Look Backward
Traditional sales reports are very good at answering questions like:
How much did the customer buy?
What did they buy?
How does that compare with last year?
Which salesperson owns the account?
What is the gross margin?
All of that information matters. But most of it describes what has already happened.
Growth requires different questions:
What else could this customer buy from us?
Are they buying less from us than they used to?
Are they growing faster than our sales to them?
Are they buying from us at one location but not others?
Are they buying some product families from us and others from competitors?
Those questions begin shifting the conversation from reporting revenue to identifying opportunity.
The Opportunity Isn't Always Where You Expect It
A smaller customer can represent a substantial growth opportunity for several reasons.
They May Be Buying Only a Fraction of What They Could
Suppose a customer buys three product families from you. You also sell two other product families they use but they're buying those products from someone else. Your sales report shows a good customer. An opportunity analysis shows uncaptured wallet share.
The important question isn't simply how much they're buying from you.
It's:
How much of what they could reasonably buy from you are you actually winning?
They May Be Growing Faster Than You Are
Imagine one of your customers has doubled in size over five years. Your sales to them increased 25%. On your internal reports, that account shows healthy growth. But you've actually lost ground. If your sales had simply kept pace with the customer's growth, the account could be significantly larger.
The same principle applies to industries, geographic markets and customer segments. Growth in isolation doesn't tell you whether you're winning. You need context.
They May Have More Places for You to Sell
A customer might buy from you at its headquarters but not at six other locations. You may sell to one division but not three others. An acquisition may have doubled the customer's size, while your relationship remained confined to the original business. These opportunities can be difficult to see if management looks only at total account revenue.
They May Be Buying Less and Nobody Has Asked Why
Not every growth opportunity involves selling something new. Sometimes it's about recovering something you once had. Consider a customer that purchased $1 million annually from you three years ago and now purchases $650,000. They're still an active customer. They may still appear on a salesperson's list of important accounts.
But $350,000 has disappeared. Was it lost to a competitor? Did the customer's business decline? Did you lose a product, plant or division? Was there a service problem? Did pricing change? Until someone investigates, you don't know whether the decline is permanent or recoverable.
Your Largest Customers Still Matter
None of this means companies should stop paying attention to their biggest customers. Quite the opposite. Large customers can be enormously important to retention, profitability and enterprise value. The point is that customer importance and growth opportunity are not the same thing.
One customer may deserve attention because you have $5 million of existing revenue to protect. Another may deserve attention because you have $2 million of realistic revenue to capture. Those are different strategic reasons for allocating resources.
And leadership should understand both.
From Theoretical Potential to Real Opportunity
There is also a danger in taking opportunity analysis too far. Just because a customer could theoretically buy another $2 million from you doesn't mean that $2 million belongs in the sales forecast. Some business may be locked into long-term contracts. Some products may not fit the customer's specifications. You may not be competitive in certain applications. The relationship may not be strong enough. The business may not generate an acceptable margin.
That's why data alone isn't enough.
We think about opportunity in stages:
Theoretical: What could the customer potentially buy?
Addressable: What portion could realistically fit your offering?
Winnable: What portion do you have a reasonable chance of capturing?
Profitable: What portion should you actually want?
That progression turns an interesting number into a useful management decision.
Your Salespeople Know Things Your Data Doesn't
Analytics can tell you that a customer once bought $800,000 and now buys $500,000. They can't necessarily tell you why. Analytics can identify that similar customers buy five product families while this customer buys only two. They can't tell you that the customer signed a three-year agreement with a competitor six months ago.
That's why the best opportunity analysis combines data with the knowledge of the people closest to the customer. The data helps identify where to look. The salesperson helps determine whether the opportunity is real. Management decides where to focus resources.
Mining the Business You Already Have
At Parkland, we call this Mining: systematically looking inside your existing business for growth and profit opportunities that may already be there.
SOAR Elevate™ Mining focuses on several areas:
Withdrawal Reversal
Customers that are still buying from you, but buying less than they once did.Wallet Share Growth
Customers buying some of what they need from you while potentially buying the rest elsewhere.Win Back
Former customers that stopped buying but may still represent an attractive opportunity.Margin Growth
Customers where the opportunity may be improving price, product mix or discount discipline rather than simply selling more.
Much of the information needed to begin identifying these opportunities already exists inside years of customer and transaction history. The challenge is turning all that data into something leadership and salespeople can act on.
Finding More Opportunities Isn't the Goal
If you analyze enough data, you can create an enormous list of potential opportunities. That's not necessarily helpful. A salesperson doesn't need another spreadsheet containing 100 accounts they should investigate.
They need to know:
Which opportunities matter most?
A $1 million wallet-share opportunity may deserve immediate attention. A $25,000 former customer may not. Another account may appear attractive analytically, but the salesperson knows there's virtually no chance of winning the business.
The objective isn't to pursue everything. It's to identify the relatively small number of opportunities that can have the greatest impact and focus the right resources on capturing them.
The Bottom Line
Most companies know who their biggest customers are. Far fewer know which customers represent their biggest opportunities. That's an important distinction.
Revenue tells you what a customer is worth to you today. Opportunity helps you understand what that relationship could become tomorrow.
And sometimes the customer sitting at number 15 on your revenue report may deserve more growth attention than the customer sitting at number one. Before spending more money looking for your next great customer, it may be worth asking:
Have we fully understood the opportunities within the customers we already have?
A Question for Your Leadership Team
Take your 25 largest customers and ask everyone on your leadership team to independently identify the five with the greatest untapped growth potential.
Then compare the answers.
If you get five different lists, you may know who your biggest customers are but you probably don't yet know where your biggest opportunities are.