‘Wake Up and Understand Your Customers’ should have been my first blog post and not my 78th! It’s taken me a few years in customer facing roles and running my own business to truly get it!
Don’t get me wrong, I’ve always known the importance of customers, having worked for some truly customer centric brands and have always done what I thought was always best for the customer, but for me that hasn’t been good enough upon reflection.
If you work in a medium to large business – as a Product Manager, in Sales, a Marketer, a Commercial Finance Manager, a Social Media Manager, a PR Manager, a Project Manager, an IT Manager or indeed a Management Consultant – do you really know what your customer wants? Or your customer’s customer for that matter? What issues do they face every day? What do they have as their number one priority? If you do, fantastic! Come back next time for my next blog post.
If you don’t or even if you think you do…read on. I’d like to outline some basics and some do’s and don’ts for people to think about. I’m not saying I’m perfect, I’m not at all. I just want to try to rationalise some recent thinking and hopefully get your thoughts.
In Part 1 of 3, I’d like to cover the basics, in Part 2 – the Do’s and in Part 3 – the Don’t’s when it comes to customer understanding
Part 1
The Basics
1. Chances are that your product or service is not your customer’s number one priority
Business owners spend their time driving their business forward – Winning new customers, keeping existing customers, ensuring cash flow and ensuring they have enough money in the bank to pay people’s wages, their own bills and their mortgages.
They don’t want to be spending their time chasing suppliers or dealing with poor service from their supply chain. If your product or service becomes their number one priority because it’s hurting their business, you’d better make sure you give it your full attention or you’ll end up losing them. It may already be too late!
From a Sales and Marketing perspective your product or service only becomes a priority when your customers have a real need for it – when some technology breaks down, when costs from a current supplier become prohibitive, when they need to make business improvements but don’t have the resources or skills in-house or when they want to differentiate themselves and are prepared to invest to do so…to name only a few. Having intelligence on your customers as to when they might be in a position to purchase products or services will save you huge amounts of time, effort and wasted effort in getting in front of a customer at the right time.
2. Segmentation – Damned if you do and damned if you don’t
Strategists, Management Consultants and Marketers need to segment the market, need to generalise, extrapolate and convince decision makers to ‘develop this product’, market to ‘this segment’. I understand completely. It is very difficult to build a product or service that is tailored to everyone. It is less difficult to market and sell to customers if you know your market, your product and your customers inside out though.
According to the Department for Business Innovation & Skill based on data collected at the start of 2013, there are around 4.9m businesses currently operating in the UK. These businesses employ over 24.3 million people, and turn over an estimated £3.3 trillion.
A massive 99.9% of all enterprises are defined as Small and Medium Enterprises – SMEs (i.e. they employ less than 250 people), and SMEs employ just over 59% of all private sector employees. 99.2% of all enterprises are defined as ‘small’ – businesses with less than 50 employees, and 74% of all the businesses in the UK have no employees at all – That’s over 3.5 million businesses that purchase and behave very differently to those with even 5 employees. Combine that with the number of vertical markets you may need to contend with and the segmentation permutations grow to a significant and often unmanageable number.
There are many ways to segment, but it’s best to start by looking at value. After all, this is why you’re segmenting in the first place – to help your business generate more valuable returns.
Create an investment model, using two or three dimensions together. This can help you build a high level portfolio view of your customer base to enable you to separate differentiated value.
For Example:
Value: The monthly or annual profit per individual customer (or revenue if profit figures are not available). Average customer value won’t help here.
Potential: Following propensity modelling at the planning level, this assesses a customer’s potential value from up-selling or cross-selling.
Retention: Again using propensity modelling, this maps the likelihood of each customer staying with your business.
3. Ignore Sole Traders / Small Businesses at your peril.
Sole Traders, Small and Micro Businesses are often disregarded by many companies as being too small to be worth bothering with. Big mistake. Oak Consult is a small business with no employees (at the moment!) but a number of associates and partners who I work with on a regular basis. We work primarily in the technology sectors and meet hundreds of other business people face to face each year. Via social media I have in excess of 15,000 direct business connections through Twitter, Google+, LinkedIn and Facebook across my brands and across the globe. I am an influencer as well as a buyer of services. People seek my opinion and I will give it. My custom is almost worthless to some of my suppliers, and it feels that way. My custom is valued by others – even suppliers that provide me with free services. Some businesses understand that whilst I may not be spending a huge amount with them today, I have the potential to spend much more with them tomorrow. It makes a difference to me and ultimately to them, because I will recommend them time and time again over any of the ‘big’ brands that can’t be bothered to know who I am. When WhatsApp was acquired for $19bn they had only 55 employees! Via a fully thought through market segmentation analysis would WhatsApp be at the top of any sales person’s agenda….or marketing….or ‘Wine and Dine’ list a few years ago? Unless you were very switched on, I would suggest not.
4. Who makes the decisions?
In this section, I’m not talking beyond the micro business, where by and large it is the owner that will always make the decision.
Understanding who makes the final decision (and who influences it) has always been a key part of selling to larger organisation. The boundaries have started to change though. Particularly around technology decision-making.
Historically, the IT department have selected software suppliers and have been trusted to make the right choice. The Marketing department has always had the major, if not only, say in which Marketing / Design / Web and Social Media agency is the right choice. Product Managers and Technical Engineers have more often than not, erred towards an ‘in-house’ solution for all the ‘right’ reasons and decision makers have been heavily influenced by the ‘experts’.
The worm is turning.
The challenge is, and there are notable and brilliant exceptions (I know many), that IT don’t understand customers or their business, Marketing Managers don’t understand the market or their customers, Product Managers and Engineers don’t like the ‘not invented here’ principle, and many others operationally, fear dramatic change. Move into the public sector and you have a whole new set of rules, hurdles and shenanigans to deal with.
As a decision maker in a business or organisation, who do you trust? It’s a tough one. For many business leaders, their ‘gut-feel’ has been enough to see them through. For others, they have leaned upon their deputies and their senior leadership team to be their conscience. Who honestly comes to the table with no baggage? I would argue that no-one does. Everyone has an angle – internally and externally.
The real trick is knowing your customers and their business well enough to know when to talk and when to listen; to know who to listen to and for how long; to know who influences who and who doesn’t. Who’s just playing nice and who wants to do business.
I hoped you enjoyed Part 1. In Part 2, I’ll be talking about the ‘Do’s’ of understanding your customer.