Tuesday, November 20, 2012


Help your customers do their homework

There are a lot of reasons why a prospect might make a first purchase from your company. Novelty, curiosity, lack of time to shop for or lack of knowledge about alternatives, pity or sympathy, effective PR and press, inexperience on their part, discounted initial pricing, great-looking marketing materials, fear of being left behind (the bandwagon effect) or shut out entirely (the scarcity argument), family or other connections or relationships, etc. 

So, before you celebrate those early sales; drink the company Kool-Aid; or pat yourself too often on the back, take another careful look at the list. You’ll notice that not a single cause or consideration really has anything to do with the quality of your product or service, the value of it to the user, or any of the other real-world measurements that matter in the long run. That’s why first sales are easy compared to renewals where (for better or worse) you’re dealing with an experienced customer and where nine times out of ten you’re not even in the room (much less in the conversation) when the critical decisions are made about contract renewals or additional product purchases. It’s this “second sale” (renewals or reorders) that secures the customer and cements the relationship for the long term.

And yet, way too many businesses take their customers for granted and then they’re caught flat-footed and surprised when the customer quits or leaves. This is why – at all of my businesses – everyone understood for the day they started that renewals were just business, but that we took terminations personally. A termination was a slap in the face. Being “fired” by a customer was a kick in the teeth. And there was never anyone to blame except yourself because most terminations are entirely avoidable if you plan ahead and if you learn to do your customers’ homework for them.

            The first thing to keep in mind when you’re trying to prevent customer attrition is that the guy who makes the renewal decision isn’t usually the original buyer. He might consult with the first buyer, but, in general, he’s a financial guy or an owner/check signer who’s always looking to cut costs , reduce outlays, and to get rid of orphaned programs, services or subscriptions that no one uses any longer.

How does he know that no one is using some product or service? Here’s the bad news – he doesn’t have a clue and he doesn’t really care. Because, in the absence of an advocate/champion within the business, the bean counter’s rule is always to cut or cancel first  and ask questions or apologize only after the screaming or complaining starts. And, since he guesses right so many times, he’s pretty fearless. After all, it’s not his ox that’s getting gored, it’s yours. And you don’t even know the guy’s name. He also knows that these days no one in the company really wants to be the person standing up and arguing for spending more money. 

So how do you fight the invisible man who’s about to cut off your oxygen and dump your product or service? Three little words: anticipation, preparation and ammunition.

             Anticipation means knowing well in advance that a renewal is coming up and getting your licks in early and often. Any organization without a comprehensive renewal tracking and tickler system deserves to be run out of business and will be soon enough. One of the great innovations in this area was a system that American Hospital Supply developed to automatically re-stock the supply closets at the hospitals which were their customers. Their pitch was that this was just a handy way to make sure that no one was ever out of life-saving materials when they were needed, but the real beauty of the program was that it made it impossible for competitors to even get a foot in the door to sell their products since the supply closets were always full.

            Preparation means taking the time to identify and recruit an internal champion – someone who works for the customer and whose job/life is made easier, smoother, or more profitable by using your product or service. Ideally, this person has the boss’s ear or is the bean counter’s buddy. He’s your man in the back room who’ll make your case when it’s renewal time because it’s also in his selfish interest to do that. But he can’t do it alone or just using his wits and good looks. He’s gonna need help.

            Ammunition is the help he needs. It’s the analysis, the back-up, the homework that you do for him so that he’s prepared and equipped to make your case and justify the renewal. Sometimes it’s a spreadsheet; sometimes it’s a couple of case studies; or a prop and sometimes it’s a market/competitive analysis that shows how your product or service is helping to make/keep his business a market leader. These things take time and they don’t happen by themselves, but they make all the difference in the world because metrics and measurements mean everything today and the guy with the black and white goods is the guy who gets the gold. Happy talk and generalities are no match for solid math showing dollar and cents results. And even the bean counters back off when you’ve got the facts and figures on your side.

            One of the simplest and most effective props I ever made was for our customer satisfaction research business in the automotive industry. It turns out that, even though it seems obvious to all of us that treating your customers better will lead to happier customers and a more profitable business, in the car business, it’s been hard for the manufacturers to directly connect improved CSI scores (customer satisfaction index) with increased profits because the most profitable dealers are often the highest volume dealers and in many cases their service departments and after-sales activities suck because they’re primarily in the business of pushing as many cars out the door as they can.

So I needed a way to demonstrate to a bunch of car guys who were buying my research services (following up with customers to make sure they were happy campers, etc.) that the cost of the service were modest compared to the added profits they’d be making if they improved their CSI scores. I hired a professor or two and had them build me a formula that linked improved customer satisfaction to increased profits, but I knew that their fancy math wasn’t going to get the job done. So I built a little sliding calculator that let the dealers see in black & white exactly how much in additional profits each incremental improvement in their CSI score would mean to them. All they had to do was slide the little card up and down and the profits were virtually in the bag. Here’s the slider:


Was it accurate? I sure hope so. Did it work like a charm? You betcha. And why? Because we did their homework for them and gave it to them all wrapped up in a handy-dandy little “machine” to show their bosses and their bean counters.

            And sometimes, that’s all it takes to avoid those really ugly meetings and phone calls where the client quits. A little thought, a 50-cent prop that buys you thousands of dollars of business, and some basic salesmanship.

Anticipation, preparation and ammunition are the keys to owning your customers for a lifetime.

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