Especially traditional companies with customer relationships that go back many years have to adapt. 

Many companies justify their – sometimes uncompromising – customer focus by referring to the old saying that it costs five times more to acquire a new customer than to maintain an existing customer relationship. Twenty years ago, in 2001, Frederick Reichheld (the creator of the „Net Promoter Score“) determined in studies that a five percent improvement in customer retention rates translates into a 25 percent or greater increase in a company's bottom line, depending on the industry. So it is and remains important to know and meet the needs and expectations of customers.

Companies have to constantly weigh up how to allocate investments: into the acquisition of new customers, into the supply of existing customers, into the development of products for the future market – the list goes on and on. But this strategy, which is very much geared to comparing costs, systematically ties up capacities that would be needed and are ultimately lacking in order to react to changing market conditions in good time. Sooner or later, you fall behind.

How do you get out of the pitfall of comparing costs while gaining the orientation to prioritize effectively?

Changing Markets, Tying up Resources to Meet Old Expectations

Innovative companies observe changes in the market, anticipate future market needs and gear their product development precisely to these needs: to market relevance.

While the product development is focused on an anticipated, future market, companies optimize the service and contact options to the known, current existing customers. Past expectations become habits. Especially when cultivating customer relationships over years and years, it is important to keep in mind that new customers have different expectations regarding the purchasing and service process compared to old ones.

In the years between 2005 and 2020, the way in which private purchasing and communication are carried out was completely turned upside down. As we enter the 2020s (whether we perceive it already or are still blocking it out), B2B buying and selling are up next, accelerated by COVID-19. The expectations of how interactions take place in a manufacturer-customer-user relationship are undergoing a tangible, fundamental shift. Interactions must become more digital; barriers that a buyer has to overcome to do business must be removed.

I still very often come across statements like „Our customers are happy with the way we do things. They don't want the whole digital thing yet. Our customers are behind in digitization anyway and are very traditional.“ But how is an existing customer – or two new customers – supposed to show willingness if they are not given the opportunity to do so at all? Don't underestimate your customers.

A big problem of tomorrow is to think we don't have a problem today.

We would be happy to discuss your organization, situation and possible approaches with you in a no-obligation meeting.

The Market is Changing: Taken for Granted in Product Development, Ignored for Years in the Sales Process

If your company does not offer any other option at all, then you should not draw the conclusion from this that your customers would not use such offers. Above all, this conclusion should not be applied to the still unknown new customer.

Instead, assume that expectations have long since changed, but your company is slow to respond: Slow because its entire organization is successfully aligning everything in familiar ways.

Assume that

  • the new generation of B2B buyers likes to be well prepared when going into discussions with sales and other important information carriers such as product experts. Information must be digitally accessible, relevant and usable. B2B buying decisions, just like private buying decisions, have long been heavily influenced by online research. Smart, digital marketing puts your company on the short list.
  • B2B buyers will happily be in contact with the sales department through remote channels. This simplifies and speeds up scheduling, saves travel costs – and is more family-friendly, because the investment of personal time is lower. „Going for a jog“ is much easier to do when you're not on the road all day. And finally, it's even safer while COVID-19 lasts. 
  • customers would buy from you digitally if they could. Depending on the industry, self-service and e-commerce offers can easily distinguish between first-time or repeat purchases and digital channels for customer service, inventory inquiries, configurators, and for example, product knowledge portals.

In my experience, companies underestimate the adaptability of their customers and their employees, especially in traditional industries.

I am happy to share two examples that show the adaptability of traditional industries and, above all, their employees:

Service process with remote diagnosis at TECE: Digitization of customer service and training activities. // A multi-vendor feedback and service app that puts the craftsman at the center of the communication process.

Customer Acquisition and Retention: Looking at Costs Alone is a Poor Guide

Traditional companies in particular are justifiably proud of being able to look back on long-standing customer relationships. And while your organization keeps an uncompromising focus on customer loyalty, your market is undergoing a generational change. 

Many companies tie up their capacities in customer retention, precisely because it is five times „cheaper“ than acquiring new customers. But this focus causes you to lose sight of what really matters:

  • effectively stay in touch with the market today and in the future.
  • offering relevant service solutions and products today and in the future.

The most successful companies will strike a balance between these costs.

Looking at costs alone is a poor guide: instead, focus on Customer Lifetime Value.

Decisions about customer acquisition, customer retention, and customer and product development should not be influenced by cost considerations, but based on future relevance – on future value.

Of course, costs should not be ignored, but I believe the cost difference (when regarding value) between retaining a „mediocre“ customer and acquiring a (potentially) more valuable new customer, is very small. 

If your company is still holding back, ask yourself these questions:

  • How much Customer Lifetime Value are you missing out on the longer potential customers take to build a relationship with companies that offer new opportunities?
  • If acquiring new customers is expensive, how high will the costs be to make up for your shortfall and perhaps even take back customers from other market players? And how long will that take?
  • How long can your company afford to serve an old generation and not prepare for changing expectations?
  • Are there factors in your organizational structure that make it difficult or impossible to change? If a company like yours were newly established today, would the same restrictions apply to newcomers to the market?

That One Big Shot is Not Even Necessary: Find Ways to Experiment

The only constant in life is change. Companies can take advantage of this. But especially if there is no previous experience, it is difficult (if not impossible) to „cleanly“ define all requirements in advance:

  • You can google how to use Marketing Automation to model a Nurturing campaign. But you can't google which campaign will be successful for you.
  • You can google how to build a self-service portal. You can't google what offer will be successful for your market, your customers and new customers.

Experiments on a manageable scale are your chance to keep costs predictable, gather experience in a timely and relevant manner, and face the unpredictability of innovations. The systematic digitization of Customer Lifecycle Management is a necessary preparation so that marketing, sales and IT can be effective together in acquiring and retaining customers in the future. The role of IT is changing accordingly as well.

Entrepreneurship Begins Where Predictability Ends

If you take an iterative approach, after a short period of time you will increasingly focus your investments on where relevance and the associated success are effectively demonstrated.

Find a partner who can walk the path of co-innovation with you: Learn and build on what works; shut out what doesn't make you more successful. Whether it's in digital marketing, sales evolution, or building digital channels like self-service portals or e-commerce.

Experience has shown that the following strategies work very well as first steps:

  • Using a proof of concept, with which you start an experiment for a manageable part of your organization. Experience has shown that this also works well for parts of a company. For example, part of the sales department, regionally or for specific products, can explore new paths and gain experience.  
  • Using Minimum Viable Products (MVP) to establish and expand digital channels and interactions. Consistent digitization also requires sustainable adjustments to the organization. MVPs give your organization the opportunity to gradually integrate the new components into everyday processes. It is also important for success that management is involved in demonstrating the relevance for future value creation.
  • Using QuickStarts to generally align the evolution of sales, marketing, and relationship management in order to find appropriate responses to new expectations.  

We would be happy to discuss your organization, situation and possible approaches with you in a no-obligation meeting.