(By Bill Lee)
“Companies that are pickier about their customers reap major rewards for doing so, particularly in today’s economy where customers are not only better able to do the activities described above, but are very often willing to execute them on behalf of the companies they do business with.“
Suppose I told you that you have access to a resource that is more empathetic, more interesting, and more persuasive to potential buyers of your products and services than even your best sales or marketing people. A resource that can do a significant amount of the marketing work that you’re spending lots of dollars on, and can do so for free. A resource that can get you to the leading edge of innovation in your industry much faster than internal product developers — and at the same time, can show you how to forego superfluous services or product features that you thought were essential but that in fact, no one would miss.
I’m talking, of course, about your customers. It’s astonishing to see companies that lavish so much time and attention (and money) on selecting just the right employees, but show little discernment in selecting their customers beyond making sure their check will clear.
Companies that are pickier about their customers reap major rewards for doing so, particularly in today’s economy where customers are not only better able to do the activities described above, but are very often willing to execute them on behalf of the companies they do business with.
So what traits and capabilities should you look for in the customers you want to hire?
This is not always obvious. Enterprise software firms were famous for signing big contracts generating lots of revenue with customers who turned out to cost more — due to demanding big discounts or excessive service levels — than the revenues they generated. Firms that failed to track the profitability of customers would have no clue there was a problem, until rapid growth stalled and costs caught up with revenues. A supposedly thriving, fast growth firm would suddenly find itself in danger of bankruptcy. Know which of your customers are profitable. For those who aren’t, figure out how to make them so, or drop them.
Once you have a handle on their profitability, then look for additional ways they can contribute to your marketing, sales, and innovation efforts, and even help improve your operations.
They derive exceptional value in return.
An excellent, objective way to determine this is to ask customers the Net Promoter question in customer surveys: how likely would they be to recommend you to a colleague or friend. Customers who are highly likely to do so are not only more likely to remain loyal, but also have a positive story to tell to their network. Remember, your buyers find customers more persuasive than any sales rep and you need to put this to work. Even companies with a relatively low Net Promoter Score will still have a core of 25%-30% of their customers identify themselves as promoters. Allowing such a resource to lie fallow is a waste. “Hire” your promoters and help them to advocate for you
They like to affiliate with other customers and buyers.
Companies that build businesses in markets where buyers like to affiliate — or would like to do so if someone made this easy — can develop a whole new set of valuable customer “hires.” Book readers, for example, love to form discussion groups. When a couple of bright entrepreneurs launched a vibrant, online community in 2007 to allow book readers from around the world to connect and talk about their favorite books — called Goodreads — the result became an 18 million-member community in just six and a half years. Jeff Bezos “hired” those customers to the tune of hundreds of millions of dollars, according to estimates.
Savvy firms such as SAS Institute working for government agencies have noticed the same thing. Conventional wisdom suggests it’s impossible to get such customers to help in marketing and sales efforts due to legal restrictions against endorsing vendors. But government employees love to affiliate with each other, exchange ideas and contribute to the greater good that they collectively strive to represent. And the fact that they don’t compete with each other removes a significant barrier to such sharing. So SAS and other companies help their best government customers do so by simply telling their story — “the good, the bad and the ugly” — to their colleagues in other government agencies. Such transparency often results in a more effective customer reference than you see in businesses who coach their references on what to say. That approach has allowed SAS institute over the past decade to win references from the US Departments of Treasury and Commerce, the Army, Navy, Air Force and Coast Guard, and dozens of other prominent state and local government agencies.
They’re on the leading edge of their industry.
Business customers who are pushing boundaries, and perhaps disrupting, their own industries are highly attractive “hires.” They’ll push you to help keep them at the leading edge. And such customers are also more likely to let the world know what they’re doing to stay on the leading edge — especially if they’re striving for recognition against an entrenched competitor, which means they’re more likely to talk about how you’re helping them do so. Cisco, for example, was well known for doing this as it was building a position of dominance in the 1990s. Find such customers in your industry — and hire them.
Also look for individual customers who are on the leading edge and who, impatient for the functionality that they need from suppliers, are making their own modifications to your products. Most industries have such customers, and using straightforward networking tools they can fairly readily be found. Indeed, in today’s connected world where an increasing number of products have software, it’s even easier as hackers will get into the software to make modifications. Even Apple — notoriously closed to any independent vendors wanting to modify their platform — has embraced this trend by allowing apps on its devices today. (These now number in the hundreds of thousands. Try to imagine an iPhone without them.) In your industry, find such “lead user” customers who are making modifications, and hire them.
They want to perform services for your other customers.
Companies are unlocking tremendous new value from customers by, in effect, turning over the jobs they once assumed they had to do (and pay for) to their customers (who do them for free). This includes software firms whose more knowledgeable customers provide support services to other users, or technology firms whose “hacker” customers modify the products they buy, make them substantially better, and share their work with other customers and potential buyers.
This is an area of great creativity, as Frances Frei and Anne Morriss have shown. The “car sharing” firm, Zipcar, for example, is mounting an impressive challenge to the rental car industry. By having customers return cars to an agreed location, gassed up and clean, they eliminate the hassle of having to go to a car rental location, wait in line, and deal with hidden charges. All the next customer has to do is show up with his Zipcar card, swipe it across the windshield, and the door opens ready for him to drive it off.
These days, if all your customers are doing to build your business is paying you money, you’re leaving a lot of value on the table.
“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”