Is Your Customer Base at Risk?

In a challenging economic climate, it is increasingly costly and time consuming to develop new business. Now, more than ever, it makes sense to keep your existing customers close and invest in expanding business with companies that are already buying from you.

Regardless of how long you have done business together, it is critical to understand and protect your relationship with your best customers – the ones that you count on to meet your goals for a stable stream of revenue and a healthy balance sheet for your company.

What can you do to protect your base from cost cutters, and continue to expand your business, even in these hard times?

The first step is to reassess your relationship with each of your major accounts and determine how likely they are to consider changing suppliers in the near future. The second critical step is to develop strategies to shore up your defenses and reduce the risk of losing customers to predatory competitors.

What Are They Buying and Why?
To better understand the relationship with your key customers, answer the following true-or-false questions:

If you answered "true" to the above questions about key customers, you are fortunate in having strong relationships with customers who will experience high "switching costs" if they consider changing to another supplier. These are costs incurred when a buyer changes from one vendor to another. Customers facing relatively high switching costs are less likely to change suppliers. Still, even they may feel forced to make that choice if they are downsizing or under strong pressure to cut back on capital investments and find lower cost long-term solutions.

If, however, you have important customers for whom the answers were "false," you have business that is potentially at higher immediate risk. If your customers see themselves as buying a commodity that is not highly critical to their business, they probably care most about factors that are not hard to duplicate, such as price, delivery, and product specifications. They find it relatively easy to change suppliers because their switching costs are low.

Strategies for Protecting Your Base
Regardless of where you feel your current customers are today, you can protect against erosion of your existing relationships, and even expand your share of business. The key is to focus on how you can increase switching costs and reduce the probability of engaging in unprofitable price wars just to keep your current customers.

• Look at how customers use your offering. If customers view your offering as a "commodity," consider how they buy it, use it, and dispose of it or re-order at the end of the usage cycle. Can you link to the customer’s ordering and purchasing procedures? Can you offer innovative solutions for replacing or recycling?
• Make sure you are performing at the highest level to meet customer requirements. Consider not only whether your customers have invested in dollars, equipment, procedures, etc., but also what other sources of value you are providing. If they care about delivery, conformity to specifications, and quality, is your company aligned with how they need and want to buy? Make sure your company is performing in all areas to the highest standards.
• Make sure the customer is aware of your value. Don’t assume the customer understands the extent to which your company is meeting and surpassing their requirements with every order. Arrange a meeting with customer executives to provide an update on what you are doing to help them meet their business requirements.
• Look for new ways to address the customer’s current business issues and concerns. Ask how you can provide additional value and benefits that will help the customer’s business succeed. Consider the expertise of your sales representatives. Can they serve as genuine business partners in solving problems and advancing the customer’s goals? Perhaps your company can offer financial arrangements that will provide a solution to a cash flow problem. You might be able to improve how you are delivering products or services to help your customers gain competitive advantage in their own markets.

Consider this: Most sales representatives spend far more time on researching and preparing for calls with new customers than they do on preparing for calls with existing customers. This is because they believe they "know their customers" and that they have already won their loyalty. In fact, rapidly changing conditions are affecting your existing base just as strongly as they are affecting prospective customers. Maintaining a keen awareness of your current customers’ issues and concerns and taking steps to strengthen your relationships can make the difference between falling behind and continuing to thrive, even in the current hard times.

Ed Emde is the Executive Vice President of Wilson Learning Corporation. To reach him or to learn more about the concepts shared in this article, contact Wilson Learning at 800/328-7937 or visit www.wilsonlearning.com/?site=Americas.