Blogs From The Front II – Customers

As I mentioned in my earlier posting, I recently interviewed a wide spectrum of B2B Marketing people across a variety of industries, in different sized companies, regarding their views of 2010.  These front-line soldiers are making daily decisions in order to meet their objectives, bounded by internal constraints and external economic conditions.

As noted, the lack of available funding/credit is their key concern.  Their second most important concern is customers.  Here is where the biggest difference appeared in my survey.  Small start-up companies are in aggressive customer acquisition mode, trying to identify and close reference accounts, differentiating their product, defining their value proposition and working to establish a customer base.

The larger, more mature companies are taking a different approach.  Rather than aggressively pursue new customers, many of the Marketing people I talked to are focusing on extracting more money out of each of their existing customers.  The strategies and tactics that they are using are varied, and have long-term implications.

  1. The “Bundle.”  Here the Marketer is tying together 2, 3 or 4 products, assuring the customer that they all work together nicely, and that by buying the bundle or adding product 2, 3 or 4 to a previous purchase, he/she can save money due to lower service costs, billing…plus having one throat to choke in the event something goes wrong.  (Note that “bundle” marketing is different than “solution” marketing, where 1+1 really does equal 3)
  2. The “New Product.” Here the large company acknowledges a “hole” in its product line, and proceeds to fill it by buying a smaller company with an acceptable product.  The new product allows the larger company to more effectively compete in its space and provides a short term solution.  Over time the new product/technology is assimilated into the larger company’s product and service offerings.
  3. Software as a Service (SaaS).  Here some of the companies, recognizing that their customers cannot afford a capital purchase, are turning to offering their product as a service.
  4. Using social media to increasing customer satisfaction by implementing communities and “listening” to what is being discussed and reacting appropriately.

Note that these strategies and techniques do not focus on product or brand promotion and/or lead generation activities (mailings, events, etc).  And the implication to the Sales organization and management is that Account Managers are needed more than Gun Slingers.

While none of these tactics are cheap, for a large company the overall cost is less than aggressive new customer acquisition.  Each however, carries risks that are recognized and must be mitigated:

  • Once the “bundle” is complete, what do you do next?  Also, if the sum of the individual pieces is less than each sold individually, will you be able to sell them individually?
  • Will a product, added from an outside company, have the same image as one internally developed?  How often can you do this to fill holes in a product line and still appear as a value-add company instead of an aggregator?
  • Once down the path of SaaS, you are committed.  This go-to-market strategy has different costs and margins than hardware/software sales.  If it is unbelievably successful, what will be the short-term, 1-3 years, bottom-line financial impact?
  • Establishing and listening to communities requires the ability to be responsive without being intrusive.  Are social media customs built into the culture?

Using some or all of these techniques, the Marketing people I talked to are in the process of increasing the average billing per customer.  This will help them meet their 2010 goals and objectives.  These techniques will not help them add new customers or grow market share…which for many were not high up on the goal ladder.

Over the long-term these actions, coupled with buyers driving to reduce their vendor count, will lead to oligopolistic markets, where 80% or more of the market is dominated by 2 or 3 suppliers.

The implication for new, smaller companies offering point products is that in 2010 they have to present a very compelling story, most likely focused on a quick ROI, in order to succeed.

Are you extracting more from your installed base?  What strategies and tactics are you using?  If you are a small company, is your value proposition hinged on ROI?

The photo above is a picture of a mine exploding on the first day of the battle of the Somme, July 1, 1916.  The British strategy was to penetrate the German lines and “roll-up” the enemy from behind.  One tactic was to bury and explode 10 mines under German trenches in order to open a hole that would allow British infantry troops of push through, followed by British cavalry.

The largest of the mines contained over 24 tons of explosive.  The explosion was heard in England.  On July 1, 1916, the British suffered over 54,000 casualties, including over 19,000 killed.  The battle of the Somme is considered a failure in terms of strategy, tactics and execution.

RHM 2/16/2010

1 comment to Blogs From The Front II – Customers

  • No doubt about it. Your best customer is your existing customer. Amazed how few companies fail to recognize that and spend all their energy chasing new customers.

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