Avoiding moments of vulnerability

The case for customer centricity is well documented. Most organisations today are fully bought into the need to be customer focused and the perils of not. In the last article on how to be customer centric, I set out five opportunities for companies to become more customer centric. In this article I outline how organisations can build on these and use them to avoid internal ‘moments of vulnerability’ in how they market and sell their products. Those that do will not only avoid unnecessary value leakage but surprisingly, reinforce their efforts to be customer centric. Four key moments of vulnerability have been identified when:

1.      Price points are determined for a product or service

2.      A sales person is in front of a customer negotiating (or at the point of sale)

3.      Policies (i.e. trade terms, SLAs) are set relating to your offering

4.      The product/service is actually used and/or delivered

Revenue Loss

EY have found that between 3-6% of net revenue is being lost at these key points where organisations are at their most vulnerable. The surprise here is that, done correctly with the right intent, the customer will also benefit from an organisations effort to address them. This is because the key to doing this lies in truly understanding your customer and aligning your business to address their needs in an efficient and effective way.

For years organisations have been charged with being too internally focused and neglecting the people that ‘pay the bills’. To counter this ‘inside out’ thinking, organisations have undertaken huge programs to make sure customers are at the heart of every decision and they do everything they can to keep the customer happy - often at considerable cost. The danger is that in these ‘altruistic' customer societies, profit often becomes a dirty word and viewed as something that organisations pursue at the expense of the customer. But does tension between the two always have to exist? Or can being customer and profit centric exist in perfect harmony to create ‘win-win’ situations for both sides? Luckily, the answer is a categorical yes and businesses that mitigate these moments of vulnerability stand to benefit in a number of ways:

·         They avoid being beaten down on price by increasingly sophisticated procurement teams

·         They are able to effectively negotiate price increases

·         They avoid folding under tough negotiations and giving too much away

·         They don’t end up selling solutions which subsequently cost them more to deliver

·         They are better at identifying and managing risk and therefore protecting profitability

·         They are able to access a greater share of their customers’ wallet

But more importantly there is real value in it for the customer too:

·         They understand the value they are getting and are therefore happy with the price

·         It can help shorten the sales cycle (and therefore time to benefit) by building greater understanding and trust

·         They get a something that ultimately better meets their needs

·         There are no hidden surprises when it comes to using the product/service

Customer Insight

So the key question is how does being customer centric help avoid ‘moments of vulnerability’ and what can marketers do to help overcome these vulnerabilities? Ultimately, customer insight is key, which is why the role of marketing is critical. Taking each moment of vulnerability, we offer some recommendations for avoiding value leakage at the same time as improving the customer experience:

1. Determining price points – Customers need to understand, believe and trust the value you create for them and your price needs to be aligned to this. Any disconnect between the two leads to lost value and dissatisfied customers. Cost plus pricing, lack of innovation in pricing models, defining your proposition too narrowly and over promising or delivering on things customers don’t care about are all examples of this.

 

2. Effective negotiation – If a negotiation has come down to a pure price discussion something has gone wrong and the customer doesn’t understand the value your organisation can deliver. The sales process is about creating mutual value. To do this the sales person needs to understand the customers business and issues as well as, if not better than, the customer. This then needs to be backed up by sales people having the capability and confidence to effectively negotiate deals that are win-win for both parties and them easily understanding the profit impact of what they are negotiating.

3. Setting policy – Policies such as trade terms and sales guidelines are always created with the best of intent but can end up being highly restrictive and annoying for customers. Confused sales people who are unclear on what they can and can’t do, terms that drive the wrong purchasing behaviours, poor compliance are all outcomes of poor policy setting.

4. Understanding product/service use – When companies do not understand how their products and services are used in the real world they end up annoying the customer through a poor customer experience.  To make matters worse it then usually costs more to deliver which reduces profitability.

Finally, the above doesn’t happen by chance. It is supported and sustained by putting the right enablers in place. These include making sure the people making decisions have the right data and insight to do so, that roles, responsibilities and accountabilities are clear and making sure you don’t fall into the trap of doing great analysis but failing to “make it stick” and executing on it when it matters, time and again.  With the right focus and effort, vulnerabilities can be turned into strengths that not only drive margin improvement but also customer satisfaction.