Not All Customers Are Created Equal

It is generally accepted in the business world that it costs 5x as much to get a new customer as it does to retain an existing customer. While this may have been true in the past, it’s complete nonsense today! This type of thinking is rooted in the Industrial Era when the key to success was economies of scale. Back then, it was all about mass production and traditional, “push” selling. The underlying assumption was that once you get a customer, you could keep selling them the same products and services. That’s simply no longer true.

The Internet and globalization have changed everything. Yesterday’s business world was stable. Today’s is defined by change. That means our customers are constantly facing new and emerging challenges. As they encounter these new challenges, their perception of value shifts.

When shift happens, our value is called into question.

The dynamic of the perception of value changing as a result in unforeseen changes in our customer’s world puts a different spin on customer retention. Rather than simply holding on to customers, we must now have a view of growing our customer relationships. In my book, Human to Human Selling, I explain that customers view their relationship with suppliers through the lens of 5 stages.

These are:

  1. Stranger – We do no business with you and we don’t understand your value
  2. Supplier – We buy from you, but your value is not differentiated
  3. Desired Supplier – We love doing business with you and seek to do more
  4. Trusted Advisor – We see you as a business peer and rely on you for advice, in addition to products/services
  5. Strategic Ally – We see your firm as critical to our ability to deliver value to our customers

Moving your customer relationships through these stages results in increased profitability and predictability in flow of business. This progression, however, cannot be done without investment. Often, the investment required is substantial. Going into a business relationship with the view that you’ll just have to spend a little upfront and then you can sit back and harvest is to set yourself and your firm up for failure.

“Right-Fit” Customers and The 80-20 Rule

A far superior approach is to filter your customers on the way in, recognizing that 20% of your customers generate 80% of your profitability. You need to identify what these “right-fit” customers look like and find more of them. Some customers will never see you as anything more than a supplier. That’s okay, as long as it’s mutually agreed upon. Those customers that see your firm as strategic to their business require special treatment. Over time, they will help shape the future of your company. Retaining these customers may require significant investment, but the return makes the investment more than worthwhile.

These accounts should have an Account Manager assigned to them to lead your organization in value creation for them. The Account Manager should have overall responsibility for the account plan. The account plan should comprise the following elements:

  • Account Vision and Growth Strategy
  • Customer background, profile and objectives
  • External pressures and internal challenges
  • Customer strategies
  • SWOT analysis
  • Root cause analysis
  • Competitive position
  • Critical success factors
  • Customer spend and our percentage
  • Financial health
  • Organization chart and business units
  • Current and targeted relationship levels
  • Sales history
  • History of value
  • Current and future sales opportunities
  • Action plan

The key to success will be the action plan. It must be easily accessible and dynamic. Many organizations do this type of planning, but they do it in Excel, Word of PowerPoint. While the planning exercise has value, the plan itself loses value because it is not readily accessible to the account management and it is not dynamic. It’s important to equip the sales team with a tool to accurately and objectively monitor their progress within an account and dynamically update their action plans based on the account’s assessment.

This type of real-time, interactive and readily accessible account planning and execution is critical to building truly strategic relationships with your best accounts. Rolling all this activity up into an account scorecard will enable you to look at the strategic health of your account relationships with an objective view. You can then decide which accounts merit further investment of your team’s time, energy and resources, and which accounts merit gradual withdrawal.

Your best accounts are looking to you to become a strategic partner. That means you really need to get to know them at a level that results in you seeing emerging challenges. It is access to these emerging challenges that is the greatest asset your customers can give you and your greatest source of competitive advantage.

Access to these challenges doesn’t come free and it certainly doesn’t come with the thinking that you make all your investments up front to acquire the customer and then coast in the relationship afterward.

Using a tool such as ARPEDIO enables Account Managers to accurately and objectively monitor their progress within an account and dynamically update the action plan based on the account’s assessment. This type of real-time, interactive and readily accessible account planning and execution is critical to building truly strategic relationships with your best accounts. Rolling all this activity up into an account score card will enable you to look at the strategic health of your account relationships with an objective view. You can then decide which accounts merit further investment of your time, energy and resources, and which accounts merit gradual withdrawal.

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