15% Can Win or Lose Your Customers
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The Current Economic Environment
Creating and retaining customers during this period of economic uncertainty must be one of the top five goals of any manufacturing business. In April 2023, many economists are predicting a recession either this or next year. It’s prudent to get as ready as you can as soon as you can.
Here are some quotes that describe how our business situation is impacting our thinking:
- “What got you here won’t get you there.”
- “Never let a good crisis go to waste.”
- “Insanity is doing the same thing over and over expecting different results.”
- “Now is not a good time to be average.”
- “Old playbooks on managing value during a crisis are no longer valid.”
Creating a New Customer or Retaining an Existing One
The reason people buy products and services is they have “jobs to be done” and need the tools to achieve their desired outcomes.
The reason people buy your products and services is they determined your offer provides them more value than any other seller they know.
Tony Ulwick, founder and CEO of Strategyn, has been studying and consulting on jobs to be done for more than 30 years. During a recent webinar he said, “Your product [or service] needs to be 15% more effective for customers to switch.”
When he talks about being effective, he means that you must create 15% more value than the incumbent for the buyer to switch to your product for future purchases. Of course, he also means that if a competitor creates 15% more value than you do, your customer will likely switch from you.
The other day I had lunch with an old friend. He recently retired after spending more than 20 years heading procurement and supply chain for four multi-billion-dollar businesses. I told him about Ulwick’s quote, and he leaned back in the chair, closed his eyes, and after about 30 seconds said, “That sounds about right.”
Identifying Problems That Will Decrease Your 15% Advantage
It may sound like an easy task to get and keep new customers, but it’s not. In Ulwick’s experience, businesses and end-users have between 100 and 150 jobs they are trying to accomplish. Not each business or each customer will have that many jobs to accomplish, but each will have some. Your challenge is to find out which jobs are theirs.
Another challenge is that not all jobs are equally important. And their relative importance can change depending on what is happening at any given time.
A third challenge for many industrial OEMs is they sell and service their products by partnering with distributors, dealers, and agents. This means that many of these important conversations with customers occur without you, the OEM, being aware of the conversation or the details that were discussed.
The name on the equipment is the OEM no matter how successful their distribution strategy is. In our globalized economy, customers are buying direct in one country, through a distributor in another country, etc. Each of these potential buyers likely will check with users of your products and service all over the world. Unfortunately, language and cultural differences may obscure the cause of any bad experiences.
Likewise, working conditions in different regions will be different. To be successful, you may have to produce focused marketing content and websites. Things like this may be easier if the preparation is centralized but uses inputs from the individual region.
At this point, you may want to give up and not worry about the 15%, but that would be a major error.
Identifying High-Priority Jobs Your Customers and Prospects Are Trying to Accomplish
You might think that you know the prospects’ and customers' jobs they are trying to accomplish so this should be easy. However, I said earlier the jobs and their priority change over time.
For example, you sold equipment to a customer more than 10 years ago. Your CRM system notes list the important outcomes they needed at that time. Since then, most businesses have been going through a digital transformation and are focusing their operations on sustainability and the circular economy. This will likely introduce changes to customers’ needs.
Customers’ needs must be identified and reviewed frequently and compared to the outcomes their specific products can deliver.
There are three ways to identify customers’ needs:
- Interview each customer and observe them using the product. This will be a giant task for a successful company. However, the good news is that the rate of change is relatively slow, and you can gain valuable insights by talking with each customer every two or three years (8 to 12 quarters).
- Create customer segments based on like needs identified during the selling process. Every quarter, you can talk with a sample from each segment and can spot trends that may lead to useful upgrades or changes to service offers.
- Annually, interview a sample of users of each of your major products. The interview process must enable you to group the results by product age to see what performance gaps are being identified for older products. Your insights may be less valuable than with the other techniques since the number of interviews will be significantly less.
Finally, always meet with customers as their equipment is nearing its end-of-life and the customer is starting to consider alternative actions they can take. The advantage is that you or your channel partner can advise the customer on potential actions they had not considered like upgrades or remanufacturing.
Who Should Perform the Interviews?
In terms of performing these customer interviews, this is where having a customer and competition analysis team is most valuable. However, it adds to the business’s overhead.
Another alternative is to have the salesperson perform and report the results of the interviews. However, if the salespeople work on commission, they may balk at being prevented from earning their commission or bonus. This is a management issue that must be solved otherwise you will lose customers or fail to capture new ones.
Finally, there are always consultants.
However you decide to collect this information, it is critical that you begin soon. Remember: the goal is to provide a 15% advantage compared to customers’ alternatives.
Sam Klaidman is the founder and principal adviser at Middlesex Consulting. He helps his B2B product manufacturing clients grow their services revenue and profitability by applying the methodologies and techniques associated with Customer Value Creation and Customer Experience professions to assist his clients in designing and commercializing new services and the associated business transformations. Contact Sam here.
