Last week I spoke about how to get distribution executives to care about customer experience (CX). Now, I’m turning to the related field of manufacturing. Many manufacturing companies also offer distribution, so make sure to review that post, too. This week, I will dive into the specific impacts of CX in traditional manufacturing – and how to get your manufacturing executives to care about them.
Manufacturing may seem an infertile ground for customer experience. How do you get more product-focused than a company that creates products for its revenue? However, other companies have found that surrounding great products with an excellent customer experience creates better outcomes for all. I wrote extensively about Dow in my book, Do B2B Better: Drive Growth through Game-Changing Customer Experience, and also included a case study with Legrand AV, another global manufacturer. Other examples exist – they just aren’t always willing to be as public as these two examples.
Churn is less of an issue for some manufacturers, who offer distinct products that competitors don’t. For example, we worked with a sweetener manufacturer with more customers than they could ever supply. For these types of manufacturers, it’s more about incremental purchases than reducing churn. Your mileage may vary – find out your current churn rate and bring that into your analysis if your company is experiencing high churn. I go into more detail on analyzing this in the distribution post from last week.
Like in last week’s post, you can’t prove your work matters through secondary research, such as those focused on stock price or revenue across many firms. You need to prove the benefits in your own data. Let’s first look at where to find the business case.
The Manufacturing Business Case for Customer Experience
Customer experience has three primary ways to drive an improved business: improved retention, increased purchases, and decreased costs. While decreasing costs is an excellent way to show short-term growth, most executives get more excited about increasing revenue. So this is where I focus. (Note: referrals are a tiny source of revenue and are typically untrackable in B2B, so I don’t even talk about them. Unless you can physically count the number of referrals and their revenue, you shouldn’t, either.)
Here are different ways to drive organic growth in manufacturing through a superior customer experience – in language that your CFO can appreciate.
A Poor Experience Invites Decreased Orders
While customer churn is less of an issue for manufacturers, a poor experience will cause clients to look for other suppliers whenever possible. Some markers of poor experience include low on-time delivery, low ATP (Availability to Promise, showcasing that your organization doesn’t have sufficient inventory), or complaints that sit unanswered for long periods of time. By tracking these operational issues and showing how they impact your surveys and attrition, you can help show the value of improving these factors as they turn into money quickly. Ensure you are analyzing these operational issues – I’ll share more below.
A Superior Customer Experience Can Reduce Price Sensitivity
A superior CX likely won’t win you a ten-point increase in price. But if your customers are confident that you’ll consistently deliver on time with no drama, that can earn you two-three points. For manufacturers who are not the low-cost provider, this is a compelling – and testable – hypothesis.
A Superior Customer Experience Earns You Expansion
Some clients deliberately elect to source from multiple providers to protect their supply chain. This was made even more important during the recent supply chain issues. You may not be able to convince clients to move to a sole-source relationship – but you can influence the allocations your company receives from clients. If you can move clients to go from ordering half their products from you to two-thirds, this is a huge win. An improved experience will increase confidence, which will make it easier to give you a higher allocation. As your experience improves, analyze whether your clients increase the categories of items they purchase from you.
Manufacturers often have multiple businesses that can serve the same customers. One of our clients focuses their CX work on creating a “Plus One” outcome – getting clients who order from one of their seven brands to order from two. This is measurable – as your experience improves, it makes it easier for your sellers to convince your clients to give your second business a chance. For this, ensure you can bring in order data from all your business units.
There are two categories of gains under innovation. First, newer products often have higher margins but are also considered riskier. As your experience improves, clients build trust, and are more willing to try these new products.
Secondarily, many manufacturers will partner with clients to build new-to-the-world products. Readers of my book Do B2B Better may remember that this is Dow’s CX home run. Look for how clients reporting better experiences say yes to joint innovation more often.
How to Enable This Impact
Just like with distribution, start with your closed loop processes to discover the negative components to your experience that are likely causing decreased orders. Complaints are an even bigger issue for manufacturers, so focus here. CustomerGauge reports that after a complaint is filed you have 48 hours to follow up with a client. You don’t need the issue to be resolved (that often takes longer) – but you need to connect with them.
Proving the revenue-based areas of business impact outlined above requires a higher level of analysis – and more data – than most CX programs use today. Showing reduced orders or incremental purchases requires ordering data from all your divisions, while tracking price sensitivity or innovation products requires the margin per order.
Manufacturing is a process- and data-focused field. Creating impact requires you to integrate your analysis with that of the business. But it’s worthwhile. Improving the experience can help you reduce price sensitivity and earn incremental purchases. The business impact is undeniable – and the time is ripe to show it.