When Reed Hastings first announced in 2011 that the mail order DVD services of Netflix would be spun off into a new company called Qwikster, the only thing that came “quick” was the rapid deterioration of both customers and stock prices.
Hastings, like many other company executives, lost sight of the most important element of business growth and retention: managing the customer relationship. The key differentiator between those companies that grow from those that simply exist (or worse yet decline), are in how the customer relationships are managed.
This can be a significant challenge for those in the valve and actuator business on account of the various complexities that exist including vast technical specifications, lengthy component lead-times and a variety of regulatory requirements. This complexity however makes managing the customer relationship even more critical to ensuring long-term business profitability. But the question remains, how is the relationship best managed?
In 1999, Nick Swinmurn envisioned the concept of selling shoes through an online store. The idea stemmed from his inability to locate a brown pair of Airwalks at a local retail store. The company today, Zappos is owned by Amazon and valued at $1.2 billion dollars. They consider their rapid growth in a crowded and competitive online market place to be a direct result of their aggressive pursuit of “offering the best service in the industry.” Consider, for example, the company’s 365-day return policy, 24/7 call center, or free shipping; all examples of customer services that are typically shunned on account of their cost. Swinmurn has proven that being in tune with what customers really want can pay off in spades.
In the case of Zappos and other wildly successful organizations, the key to managing the customer relationship results from clearly deciphering what customers perceive as value. This is a critical take away for those in the valve and actuator business. Spend less time defending price or lead-time, and more time providing value.
If you have the desire (and nerve) to make such a transition, here are three proven means of building stronger and more profitable customer relationships:
1. Become habitual about habits.
Companies like Amazon and Apple are adept at tracking customer-buying habits in order to make suggestions on future purchases. “We noticed you recently purchased this book or product; we thought you might be interested in this sale.” If you want to capitalize on customer growth, you must collect and monitor customer-buying habits in order to understand needs. Do you know what products or services your customers are investing in? More importantly, do you know what they are most likely to buy in the future? What is changing in their businesses that will influence their future buying behaviors? Be habitual about tracking customer spending and provide value to the relationship by identifying solutions to support your customer future needs.
2. Unbundle and serve.
How we buy music today barely resembles what was once a longstanding tradition. If you were interested in listening to a song at will, you bought the artist’s entire album, simple. Along came Steve Jobs and his team at Apple who recognized that there was more value in unbundling albums to better serve iTunes customers. More importantly, by unbundling they were positioned to significantly increase revenue from music sales. Where spending twenty dollars for an eight-song album once seemed reasonable, the concept now is completely taboo. Too many businesses in the valve and actuator business have focused on bundling service offerings, components, and other products rather than consider the possible value in unbundling. Sure the overall revenue may be less, but if by doing so you can differentiate yourself in the marketplace, customer relationships and sales will only improve.
3. Develop products and services that help customers.
Have you noticed that virtually every company is selling cleaning supplies today? From uniform providers to office supply companies, it seems everyone is offering cleaning supplies to their customers. Have you ever stopped to consider why this is? It’s because their customers asked them to. Back in the 1990’s, when the trend was to reduce the number of suppliers, the smartest of the bunch quickly took on additional product lines that would align with their customer value offerings. The key phrase here is “align with.” Are there other product lines or services that you can acquire or introduce that will further enhance your brand, and more importantly your value in the eyes of your customer? If you’re not sure, try asking your customers.
In my work with businesses in the valve and actuator industry, customer focus is either placed on making that one big sale (which is like riding the waves at the beach: fun while it lasts, but eventually you have to start all over), or they’re living in a tyranny of transactions, where sales are measured by transactional volume and value, but overall revenue never seems to grow.
Stop focusing so much on transactional price or volume and start considering what will provide value to your customers. Integrate the three steps above to capitalize on customer relationships and watch profits soar.
© Shawn Casemore 2012. All rights reserved.