Tuesday, April 03, 2007

Inside the box

The current competitive business landscape confronts two certainties. One, the cost of customer acquisition rises daily. And, two, the longer you hold on to that customer, the greater its value.

It seems simple enough; once you get a customer, you do what you need to do to keep it. But tension arises because this simple, straightforward business model is too often trumped by other demands and market requirements.

For example, the public markets’ are merciless on a quarterly basis, while long-standing customer relationships often have short-term ups-and-downs. Forced to choose forbearance or foreclosure, a good customer may get little slack when circumstances affect its budget.

Less objectively, but just as potentially upsetting is our own human urge to constantly be looking ahead for the next challenge, the next opportunity. We tend less to the bird in hand in favor of chasing the two in the bush. It is why the grass is always greener. We can get caught up in the chase and short-change current customers and colleagues.

The combination of market pressures and human nature can be deadly. It can lead to the misallocation of investment capital or a compensation imbalance (when we fall in love with people or markets). It can serve as a logical basis for throwing good money after bad or for seeing slow-growth as no-growth and under investing in standing customer relationships.

Putting a check on such behavior doesn’t get much time in an office because careers – especially public ones – are not made on caring and carrying forward as much as they are on winning and moving forward. “Victorious or on your shield” is an ancient standard that still resonates.

It may be, though, that the rise in competitive pressures that has pushed the cost of customer acquisition and the pain of their loss higher can lead to a bit more balance in the equation. It begins not with thinking outside the box, but inside it. Inside the company you have built and the customers it serves.

If there is value in keeping a customer and even greater value in continuing to improve productivity and margins. Surprisingly, keeping, strengthening and growing relationships is done in much the same manner as companies pursue new customers.

We seem willing to take the time to think through a prospect’s competitive landscape, understand the consumer, business or user value of a given product or service, assess the expectations of the market and view it through the lens of past practice, but we don’t often do that for current customers or clients. By not asking it of ourselves, we wait to be asked by our customers. And mostly, by then, it is too late to make a difference.

The trick might be to eliminate the distinction between a current customer and a prospect. After all, each needs to feel confident in your ability to deliver, each needs to be assured that our products and services are offering high-value and each wants our focus to be on them. The result just might be a sharper focus on opportunity, not just the new ones, and offers to our customers that more closely reflect the current landscape, not the one we mapped when we first made our pitch.

If we treated current customers as prospects and prospects as customers, it would have the added benefit of aligning our R&D, sales & marketing, co-op programs, compensation and management. This kind of outside-the-box thinking would put the focus where it really needs to be – inside the box.

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