Understand your Customers to boost your Value
Customers are the source of a business’s revenue; this makes it almost impossible to spend too much time understanding who they are and why they buy your products or services. In the third of this four-part series on preparing your business for growth, Ian Widdop, director of business transformation specialist Growth Partners, looks at the value of customer insight.
A few years ago I did some work with an explosives company that was going through a customer discovery process with a mining giant. Almost out of nowhere, the opportunity arose for the explosives company to manage part of the mine, which had been experiencing severe problems resulting from a lack of skilled resources. Three years on, the two companies are still engaged with each other, and the explosives company is constantly finding new opportunities to grow its business through the mine, which has handed over a core part of its business – the drilling and blasting of rock. What is most important here is that value is being created in the customer’s own currency, with the explosives company billing the mining company on a cost per ton of rock basis. Ultimately, this all came out of understanding the customer’s profile, business drivers (the problem and opportunity pressures that create the need for change), and business initiatives (the projects, programmes or plans that address the business drivers).
In today’s economy, building in-depth knowledge of your customer base – known as customer insight – is no longer simply about knowing everything about your customer; instead, it’s about understanding how your customers create value for their customers, and how they in turn create value for their own set of customers. Building an awareness and understanding of this continuous flow of value chains will enable companies to make crucial progress in preparing for growth.
Understanding the value your customers have to offer their customers entails taking a far more proactive approach to your customers’ business. Let’s look at outsourcing, which is really nothing more than a clever supplier saying, “Look at what I can do for you. You may do this internally now, but it does not fit in with your business model and I can do it better and far more efficiently”.
If the supplier proves that he can manage the task more effectively, he can offer the customer improved efficiencies and thus greater revenue or profit. Understanding the customer’s needs at this level involves understanding his business spheres, the different degrees of complexity in which he operates, and the different degrees of scale of opportunity that exist for the supplier.
SWOT analysis
Much detail is required and account profiles can be lengthy documents. Who are your customer’s directors? What can you learn about their long-term direction? How are they achieving their strategy? What do they do on a day-to-day basis to move them in the right direction? Are they doing it well? Can you find a way to engage with them in which you offer them greater value by helping them to do things more efficiently? By constructing your own SWOT analysis of your customer, you will have the ability to create your own strategic plan for them. Much of the information you are looking for may be closely guarded; talk to them to gain access to the data you need, check with them constantly to gain further insight, and to turn that data into information, and then customer intelligence. Once you have achieved an understanding of where you can add value, you need to define your value to the customer. This involves the following steps:
- Determine methods to bring your capabilities and solutions to bear on your customer’s business drivers;
- Tell your customer what your solutions are delivering in bottom-line terms and maintain this approach consistently;
- Get the customer to agree and sign off on these improvements; and
- Set up systems of measurement and ensure your customer owns and operates them.
If you can match what you do well with what they need, then you can offer them unique value – which brings you closer to closing your sale.
Being proactive here is key. Ask yourself constantly how to think your way into your customer’s organisation. If you do that on a consistent basis and adopt the behaviours that requires, you will find yourself continually faced with opportunities for growth. We operate in a complex business environment and customers are simply no longer interested in products – your only differentiator is how you sell. Your approach to your customers will determine whether you survive and grow, or die.
Author: Ian Widdop
Director
Maximus