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6 Steps to Create a Portfolio Management Plan that Will Strengthen Customer Loyalty

Understand the market, get to know your customers and use appropriate benchmarks in creating a portfolio management approach to customer retention.
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In part one, I dove into the reasons why portfolio management, a common concept in the world of finance that helps financial advisers to differentiate from the competition, is applicable to distribution. Having outlined the parallels and potential for distributors who apply portfolio management to certain customers, let’s talk application.

Read part one, “The Secret ‘Value-Add’ in Distribution: Portfolio Management.”

What does it really mean for distributors to take this approach?

  1. Understanding what the market looks like. To design portfolios, you must first dive into your own data for industry trends and package that information up into insights for core customers. These insights can be generated by customer type, product category, customer size, type of product (new, high/low penetration, top selling, etc.), geography, etc.
  2. Getting to know your customers. This includes the obvious, like their needs, goals and characteristics. It also includes the not-so-obvious. Dig deeper to understand what’s important to your customers. For example, developing “proprietary” data points around certain product characteristics (e.g., “made in America,” “eco-friendly,” etc.) and documenting your observed sales trends around these characteristics can be incredibly powerful.
  3. Creating and using appropriate benchmarks. You’ll base these benchmarks on your customers’ input and goals. Knowing your customer naturally leads you to evaluate their portfolio and performance against groups of customers with similar characteristics or needs, like customer segment, product category focus, customer size or geography.
  4. Constructing, diversifying and optimizing portfolios. Each portfolio should be mapped to meet the individual needs and goals of the customer. When designing portfolios with customers, you can let them select products where they self-identify as strong and use “market portfolios” where they aren’t – which is where you can be of greater assistance. Also, you can use this opportunity to address where you can help customers expand into identified “growth areas.”

All of this may sound intimidating, but it’s simpler than it seems. A data analyst should be able to capture these trends at a high level, as indexed to other customers.

Here are a few examples of statistics to consider in reviewing portfolios:

  • Fill-rates
  • Growth profile (overall and within certain product categories)
  • SKU and brand counts (again overall and within certain categories)
  • New product adoption
  • Use of promotions
  • Product category gap analysis versus others
  • Product selection (top sellers, up-and-coming product, mix of value/premium products)
  1. Being smart about selecting products. Once customers acknowledge gaps in their portfolio based on statistics you share, you can collaborate with them to fill those gaps. You can drill down into the specific key products that help bridge those gaps relative to what other top customers are accessing: products that have better fill-rates, are top sellers, have high-growth statistics, are on promotion, etc.
  2. Conducting portfolio reviews. These can also be viewed as scorecards. One secret to an effective portfolio review is not to use it as an opportunity to sell. Merely sharing customer performance and overlaying it against the right benchmarks could be enough to get the ball rolling. Customers will identify where they are surprised. For example, a scorecard may show where they are carrying far more SKUs in a product category than typical customers or missing out on top sellers. The key is to identify where “different” is surprising to the customer and providing overall recommendations that couple their reactions to your additional market and product insights.

Brent Johnstone is co-founder of ActVantage with an extensive background in putting analytics and technology into practice as an analytics-focused private equity principal, as CEO of a pet supply distributor, and after serving several prominent roles at large and small analytics-oriented software companies. Before ActVantage, he founded Granite Analytics and developed GraniteEdge, a distributor-focused, customer-facing suite of tools designed to reinvent engagement between distributors and their customers. Reach him at bjohnstone@actvantage.com or visit actvantage.com.

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