CEO Spotlight: The Art of Creating Customers

By Bill McDermott

Bill McDermott is CEO of SAP. In this monthly Selling Power magazine column, he shares vital lessons about selling, success, and winning. Each column includes a short video featuring McDermott, so you’ll learn from a role model whose clarity of thought and passion for winning generated extraordinary results. Check out Bill McDermott’s new book, Winners Dream: A Journey from Corner Store to Corner Office.

When I was in high school, the owner of a corner deli where I worked wanted to sell the little store. I convinced him to sell it to me for a $7,000 loan, including interest, with a promise that I would pay him back within a year. He agreed, and I got to work.

My biggest hurdle was increasing sales. I had to figure out ways to get more customers into the store. The business, however, had serious competition. A few blocks away were a convenience store and a supermarket, and I quickly realized that I was not big enough to compete with chain stores on price or selection. Instead of offering more products at cheaper prices, my deli’s success would depend on offering customers something my competitors did not. So I asked myself a simple but critical question: who was my base? To figure this out, I became obsessed with watching and listening to people in the neighborhood. Soon, three types of new customers emerged.

A block and a half away was a senior citizens’ complex full of elderly folks who did not like or were physically unable to leave their homes. They needed groceries, but my competitors didn’t offer delivery services. Bingo! I knew what to do. Just like that, by regularly dropping off milk and eggs and bread to their doors, senior citizens became a customer base.

I noticed something else: every Friday, dozens of blue-collar workers streamed into my store, flush with cash from their weekly paychecks. The problem, I observed, was that by Sunday morning, these guys were broke. I didn’t see them again until the next Friday. It hit me: I would extend them credit. This was a first for the workers. They were grateful, no one ever stiffed me, and I won their respect and loyalty.

I identified a third customer base by watching high-school kids line up outside the convenience store down the street. The store’s manager was letting only four kids into the store at one time because, I figured out, he thought that if he let too many inside at once, they would steal stuff. The store’s lack of trust in its teenage customers was my window of opportunity. I told the kids I’d let them in 40 at a time. I also installed a few video games. Soon the deli was bustling after 3:00 p.m. on weekdays. Not only were the kids popping dozens of quarters into the machines, they also bought drinks, snacks, and sandwiches. Because I gave them trust and expanded my services to include games, the teenagers gave me their business.

By focusing on serving these three groups, my store’s sales grew. Eventually I had enough continuous profit to share money with my family, buy myself a brand-new 1980 metallic-gray Firebird, and pay back the $7,000 early. When I sold the deli after graduating from college, the deli’s profit had funded my education.

The lessons I learned growing the corner store helped me build a successful sales career that led to senior-management positions and, eventually, to the global CEO role I have today. In almost every position, I’ve been responsible for growing revenue and profit. Time and again, I’ve expanded my services and markets by following these takeaways from my deli days:

1. Get to know your customers. Ask yourself, “How can I identify and serve their unmet needs? How can I create a better experience for them? What do they want besides the products or services I currently offer?”
2. Differentiate yourself. Ask yourself, “What are my competitors doing to win more customers? What can I offer that’s significantly better or more unique than what my competitors are offering?”
3. Create more value. Ask yourself, “What is the best blend of economic value and relationship value? How can I add more value to move from a preferred vendor to a strategic innovator?”

Here are some questions for sales managers:

1. When was the last time you spoke with your customers to find out more about their needs, what they like, and what they want? If it wasn’t yesterday, get busy.
2. Who beyond your existing customers have needs that are not being met, and does your definition of value align with your customers’? If you don’t know, start observing.
3. Are you coaching your salespeople through role-playing and role-modeling on how to lead insightful conversations with customers that are centered around value? If you aren’t, start today.