Retaining Your Customers
By M. Dana Baldwin
These are difficult times for many companies. For some this may be an understatement, for others not so much of one. Stepping back and looking at your business from the outside, are there things you should consider concentrating on and/or doing better to keep those customers you have? Chances are that there are a number of things you could do to improve your communications with and relationships with your current customers.
Even if many of your customers are not able to buy as much as they were buying a year or two ago, with their business shrinking to some degree, it is worthwhile to make every reasonable effort to keep these customers as happy as you can with what you offer, be it product or service based (or both).
There are three simple reasons for this effort to be made. First: You need to make every sale you can to keep your own business viable during this slowdown period. Second: You should aim to retain as much of their business as you possibly can so when the turnaround comes, you have built on your relationship with each customer to the best possible extent. The goal here is to be the source for each customer's needs when business returns to higher volumes. Third: Current customers are usually less expensive to keep than new customers are to find, develop and cultivate into regular customers.
How can we do this in an environment where everyone is looking to cut costs, reduce staffing and/or minimize inventory investment in order to survive these difficult times?
The first consideration we suggest is to find ways to be closer to your existing customers. The targets here include: Finding ways to communicate better with customers, not just at the level of initial or usual contact, but in any way that will help your business be a better resource or even partner with your customers.
It may be that you can be not only a supplier of materials, parts or services for your customers, but that you can become a resource for information/data which is needed by your customer in order to allow them to process their products and deliver them to their customers more effectively and possibly at a lower cost.
One example of this is the story of Marshall Industries of El Monte, California and the journey that Rob Rodin, CEO, led his company through to totally reinvent itself. Marshall Industries was a distributor of electronics components to a wide variety of industries. When Mr. Rodin started his epic quest to reinvent his company, Marshall had sales of about $500 million per year. The company was organized in a manner which was and, to a great extent, still is the norm for a distribution company. He had managers who had specific objectives to attain each year, sales staff who were compensated on total sales dollars, etc..
In looking ahead, Mr. Rodin determined that there was only modest potential for growth if he continued his business in this same mode. So he made revolutionary changes. He eliminated the MBOs for managers. He eliminated the commission program for sales. He changed the total company focus from just supplying electronic components to his customers, to becoming a repository of knowledge and information that his customers needed and wanted. He changed the relationship from one in which his company supplied commodities at competitive prices, to one in which his company became an integral part of his customers' internal design and engineering processes by supplying the detailed design information needed by the design/engineering staff at his customer. He changed his commodity business into a knowledge based business, with the result that his people became a part of their customer's teams, involved from concept to completion. He changed the internal systems to support the new direction for the company. As a result of changing the focus of his company from being a parts and components distributor to becoming an integral part of his customers' design and engineering teams, supplying data and application information to myriad users as well as the many parts and components, the sales of Marshall Industries skyrocketed to over $1.7 billion per year in under six years.
Questions that Rodin and other CEOs ask and find answers for include: Do you have the right insight into your customers? Do you have the ability to respond to the needs, preferences and interests of the customer based on that insight?
The first question is asking how well you know what your customers need and want, and why they want these things. Do you have sufficient insight about your customers that you can create responses based on the individual needs for each specific customer on a timely basis to meet those needs?
How does one develop this type of insight into customer needs? You must create a single view of each customer. This means you need to integrate all your sources of information and data about each customer and develop a strategy for developing and utilizing effective customer communications (both inbound and outbound). This means gathering and consolidating information from all points of contact with the customer -- everything from your sales staff contacts, email, voice mail, snail mail, the internet, etc. From this input, you need to consolidate data and build a profile of each customer -- at least every significant customer -- and continually maintain this profile during and immediately after each contact with the customer.
The result will be a view of each customer that is more comprehensive than in the past -- one which will help guide your approach to making your company more valuable to each customer. Every contact can become an opportunity to provide each customer with an ever better relationship, resulting in more opportunities to serve and to interact with the customer. Long term, this provides your company a higher value for each customer as you become more integrated into their business as an active, interested and informed supplier. You change the base of competitiveness from a price based commodity transaction to a service based knowledge provider which also provides the components, products and services that you have helped your customer integrate into their own products and services. You will become a more complete, higher value supplier, with the expansion of what you can bring to each transaction that helps your customers become better at what they do for their own customers.
The second question (from above) must be answered affirmatively at the same time in order to complete the process of becoming a well integrated knowledge-based supplier. Insight into the customer's needs and preferences is not sufficient by itself to give your company the inside track with your customers. You must have both the attitude within your company that you will evolve into the desired knowledge based resource and \"partner\" for your customers, but also you must commit to making the infrastructure and philosophical changes needed to complete the transformation.
Your company must put in the appropriate systems, ranging from small, manually run all the way up to total enterprise-wide systems which will allow you to supply the level of support and information/data necessary to meet your customers' requirements. Equally as important, you need to make the commitment to grow and evolve your systems to meet the ever-changing environment in which you and your customers are working.
One approach to these questions is your ability to have ongoing, regular, structured communications with your customers. You need to provide ongoing analytical capabilities to help build your knowledge of your customers. Knowledge of their evolving needs and preferences, and possibly going so far as to look at the customers of your customers evolving needs and preferences will help you maintain the optimum relationships with your customers. By analyzing what is happening in their industries, your company may be able to anticipate new opportunities even before your customer knows those opportunities exist. By helping your customers succeed, you will help your own company to succeed as well.
While this sounds as if it could be very expensive, especially for a company in a declining market, there are ways to start modestly, and to profit from the small steps that you take as you get into this process.
First, for a smaller company, invest in a Customer Relationship Management program (CRM). Gold Mine or ACT! can provide many very functional tools for a very modest investment. For larger companies, there are more sophisticated CRM programs which may well integrate data already in your IT system to help build your data base on each customer.
Using one of these tools to track customer contacts, sales calls, letters, emails, etc., and consolidating the information into the CRM program will allow anyone who makes a customer contact to see what the situation is with each customer, the history of recent orders and inquiries and other factual data. By spending some time analyzing these data points, a profile of each customer may be built, allowing each person who is in contact with a customer to understand where your company can provide a product or service the customer needs, how it might be applied and how to better serve each customer as that customer wants to be served.
By making your company more valuable to each customer, it improves the possibilities that your company will be a stronger participant in the future business of that customer. By providing more specialized and targeted information about each customer, you allow your customer contact people to present a unified message to each customer that they are important to your company, that everyone is knowledgeable about the needs and preferences of the customer, and that your company is concerned enough to do an exceptional job of building and maintaining an effective relationship for the both of you.
While your sales volume may not hold up in the short term, the fact that your company appears to care enough to make the efforts involved to build and develop the relationship will encourage many of your existing customers to stay with you in the downturn, and to build up with you when business improves. It will require the support of everyone in the company. Attitudes must be focused on providing quality service and knowledge/data, on a timely basis, supported by sufficient infrastructure to make things happen as they should in our knowledge-based economy. We are in a 24/7 world, with broadly available information on virtually everything, and in order to compete effectively in these trying times, your company must be able to focus on what the customer wants and needs, have the right information readily available, on time, and to be able to deliver both that information and the supporting products or services when and where needed.
Not an easy challenge to overcome, but one which is well worth the time and investment, and possibly even the total transformation of the company, if needed to be able to compete successfully in today's market places.
Dana Baldwin is a Consultant with Center for Simplified Strategic Planning, Inc. He can be reached at at