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Would Your Customer Say Yes a Second Time? 

John Holland | Apr 2, 2007 1,499 views No Comments

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While they may not articulate it in this manner, most companies (especially those selling software as a service) are in the renewal business. Companies that fail to provide a positive customer experience will struggle to gain customer loyalty. How customers are sold (or how they are allowed to buy); how expectations are set; and how accounts are monitored after a sale are factors with long-term effects upon customer loyalty and retention.

Recognizing the high cost of acquiring new accounts, the CEO of a client I work with has a philosophy of acquiring “customers for life.” This may seem to be an ambitious goal for a company in the competitive copier and printer arena, but the CEO, whom I’ll call “Larry,” does more than pay lip service to achieving his stated desire. He has spearheaded several initiatives to empower his staff to improve customer retention. In the last five years, the renewal rate has increased from 68 percent to 83 percent. This improvement can be attributed to focusing on three major areas:

  • How accounts are sold
  • How expectations are set
  • How results are monitored

Five years ago, selling had degraded into feature-function-pricing wars. Buyers made decisions almost entirely based upon price. When prospects became customers, sellers spent minimal time on account management, unless there was a potential upgrade or new requirement. Most salespeople spewed features and opinions to convince or persuade buyers to do business with them. The most prevalent closing technique was discounting.

This company’s customers speak with their checkbooks.

Larry decided to establish a culture where selling (more accurately, buying) became much more about the customers, less about the products. Salespeople learned to ask questions to learn about the buyer’s business issues and determine if there were a potential fit to address the buyer’s needs. In doing so, they usually could establish value so that a solid financial case for doing business could be documented.

Usage versus product

Executives understand the concept of spending money to make money. By focusing on product usage versus product and using the customer’s numbers (baselines of where the customer currently is and potential improvement the customer projects), buyers have a clear idea of the cost versus the benefit. I should note that customers take ownership for achieving their goals, and all numbers used are the buyers’ opinions. This is drastically different than vendors trying to impose their generic “value propositions,” which few buyers believe and virtually all discount. By discussing the buyer’s business issues first, the company eliminates many of the commodity aspects of a feature-function approach to selling.

To move sellers further from commodity sales, the company offers service on all printing devices including those that had been acquired from other vendors. This offering includes monitoring and stocking consumables (toner, ink, etc.) and taking responsibility for printer drivers. By offloading that responsibility, customers can potentially minimize outages, which would cause delays in printing output.

One of the benefits of determining a buyer’s issues is that many of the root causes become variables that can be monitored to track results. Examples of metrics that may be monitored for Larry’s customers include:

  • Average response time for service calls
  • Mean time to repair
  • Unscheduled down time
  • Consumables out of stock
  • Average cost per page of printed output
  • IT resources required to resolve printer hardware issues
  • IT resources required to resolve printer software issues

The customer agrees to the metrics during the decision process, and they are monitored on a quarterly basis. While the hope is that targets are met or exceeded, this process ensures that any customer problems will not be more than 90 days old.

When a lease or maintenance contract is due to expire, the company’s CRM system gives the salesperson six months’ advance notice. Instead of the traditional renewal conversation of a seller saying: “Your contract is up next month. Here are your renewal options…,” buyers now hear:

“Over the last three years, your unscheduled downtime for printers has been reduced by 47 percent. Your average cost per page has decreased by 18 percent, and situations where consumables are out of stock have been reduced by 91 percent. Your contract expires in six months. May I present some renewal options for you?”

This company’s customers speak with their checkbooks. Since implementing this approach, renewal rates have improved from 68 percent to 83 percent. Another benefit has been that when customers are used as references, prospects are often impressed by the level of the vendor’s commitment in monitoring results and the fact that the benefits realized can be clearly articulated. Often these results are helpful in having prospects quantify the potential improvement they can realistically expect to achieve. The CEO continues to strive for a 100 percent renewal rate (customers for life), but he is pleased about the trend.

Everyone seems to be striving to be customer-centric in hopes of improving customer loyalty. To do more than pay lip service to those objectives, consider how your customers are sold, how expectations are set and how results are monitored. Loyal customers are a cornerstone to your future success.

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