What to do
August 20, 2023

80/20 Quad 4: What Do You Do With It?

by Bill Canady in Management Practices0 Comments

80/20 Quad 4: What Do You Do With It?

written by Bill Canady | Management Practices

August 20, 2023

Quad 1? You know what to with it. It’s your Fort. You need to hold the Fort—not at all costs, but at a rational cost. That means allocating as much of your resources to it as possible, including as many of your top-performing people—especially from your sales force—as possible. Where do you get these people? You may have to hire some, but your go-to resource is from inside the company. You need to move your best people up from the other quads to this one.

Now, Quad 2. That’s your “Necessary Evil,” with the emphasis on “necessary.” In this quad are the same class of customers in Quad 1: A customers. But the A customers here buy B products. Because you want to keep those customers satisfied, you must devote at least some of your resources to ensuring that they are served with the B products they want or need. Just how much to devote to this quad requires thinking, with results monitored continuously and the level of costly service adjusted accordingly.

Managing Quad 3 is a little more straightforward. It consists of B customers who buy A products, which is usually not a huge pool. The rule of thumb here is that this is good business, provided that you run it transactionally, investing as few resources as possible. This means transferring as much to the business online and setting absolute prices. You don’t want to tie up salespeople in Quad 3 fulfillment and negotiation. They need to be focusing on Quad 1. Just don’t become a slave to the rule of thumb. Monitor and adjust. Thinking is required.

That leaves Quad 4. What to do with it?

Quad 4

 These are your lowest-performing customers intersecting with your least profitable products. If you allocate your resources suboptimally, you will dilute service to both Quad 1 and Quad 2, thereby risking the loss of some of your best customers. So, what to do with Quad 4? The short answer is to dump it, get rid of it, let it wither, dry up, and blow away.

If this sounds harsh, just consider that investing in products and customers that are breaking even at best and costing you money at worst has consequences far harsher. Ultimately, many of the customers and products in this quad are killing your business.

There is urgency in this quad, but responding to an urgent situation does not require you to stop thinking. Identify the products in Quad 4 that sell the most and are the least unprofitable. Price these up to a point that ensures you a margin. Doing this will almost certainly mean losing some customers. So be it. These are, by definition, customers you do not need and do not want. They are sources of cost rather than profit.

Minimize quad 4

Pricing up is the easiest move to make. Streamline the sale process by automating it. Put it 100 percent online. Even if you offer free shipping of your best products, add shipping charges to those in Quad 4. Consider setting minimum order quantities. Set terms that favor the business, such as payment in full with the order. Reduce options, colors, and styles. Do anything to reduce your costs.

Finally, bear in mind that the four quads are not the nine circles of Dante’s hell, in which sinners are condemned to their “circle” for eternity. Occupancy in the quads is a function of time and situation. People and products move up and down all the time. Take a strategic hand in that movement. Work on promoting B customers to A customers. Curate your products. Find ways to profitably move some B products over the line to the A category. Incremental improvement upward among the quads is the royal road to profitable growth—and there are customers and products in Quad 4 who are capable of making that journey.

author avatar
Bill Canady
Bill Canady has over 30 years of experience as a global business executive in a variety of industries and markets focused on industrial and consumer products and services.

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