HINDSIGHT - WRITE SOMETHING WORTH READING ABOUT OR DO SOMETHING WORTH WRITING ABOUT
Wednesday, November 21, 2012
Tuesday, November 20, 2012
HELP YOUR CUSTOMERS DO THEIR HOMEWORK
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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