During VUCA Times, You Must Influence Customer Retention or Churn
This is the opening paragraph of a recent post of mine:
We are again living in uncertain times. The name for uncertain times is VUCA, which stands for Volatility, Uncertainty, Complexity, and Ambiguity. It describes constant, unpredictable change that is now the norm in many industries and areas of the business world.
VUCA times include things like recession and high inflation. Influencing customer retention or churn during economic uncertainty must be one of the top five goals of any manufacturing business. While this objective must always be top of mind, it should be assigned a higher priority than usual now. In April 2023, many economists predict a recession this year or next. It’s prudent to get as ready as you can as soon as you can.
Here are some quotes that describe how our business situation is impacting our thinking:
- “What got you here won’t get you there.”
- “Never let a good crisis go to waste.”
- “Insanity is doing the same thing repeatedly, expecting different results.”
- “Now is not a good time to be average.”
- “Old playbooks on managing value during a crisis are no longer valid.”
Creating a New Customer or Retaining an Existing One
People buy products and services because they have “jobs to be done” and need the tools to achieve their desired outcomes.
People buy your products and services because they determine that your offer provides them with more value than any other seller they know.
Tony Ulwick, founder and CEO of Strategyn, has been studying and consulting on jobs to be done for more than 30 years. During a recent webinar, he said, “Your product [or service] needs to be 15% more effective for customers to switch.”
When he talks about being effective, he means that you must create 15% more value than the incumbent for the buyer to switch to your product for future purchases. Of course, he also means that if a competitor creates 15% more value than you, your customer will likely switch from you. Put these two ideas together, and we say:
15% Can Influence Customer Retention or Churn
The other day, I had lunch with an old friend. After spending over twenty years heading procurement and supply chain for four multi-billion-dollar businesses, he recently retired. I told him about Ulwick’s quote, and he leaned back in the chair, closed his eyes, and said, after about thirty seconds, “That sounds about right.”
Identifying Problems That Will Decrease Your 15% Advantage
Getting and keeping new customers may sound easy, but it’s not. In Ulwick’s experience, businesses and end-users have between 100 and 150 jobs they are trying to accomplish. Not each business or each customer will have that many jobs to accomplish, but each will have some. Your challenge is to find out which jobs are theirs.
Another challenge is that not all jobs are equally important. Their relative importance can change depending on the situation at any given time.
A third challenge for numerous industrial OEMs is selling and servicing their products by partnering with distributors, dealers, and agents. This means many meaningful customer conversations occur without you, the OEM, aware of the conversation or the details discussed.
The name on the equipment is the OEM, no matter how successful their distribution strategy is. In our globalized economy, customers buy directly in one country, through a distributor in another, etc. Each potential buyer will likely check with users of your products and services worldwide. Unfortunately, language and cultural differences may obscure the cause of any bad experiences.
Likewise, working conditions in different regions will be different. To be successful, you may have to produce focused marketing content and websites. Preparing for this may be easier if it is centralized and incorporates input from the individual region.
At this point, you may want to give up and not worry about the 15%, but that would be a significant error. Remember that the 15% will influence customer retention or churn. Can you afford not to sell to some new customers or lose current customers?
Identifying High-Priority Jobs Your Customers and Prospects Are Trying to Accomplish
You might think you know the prospects’ and customers’ jobs they are trying to accomplish, so this should be easy. However, I said earlier that jobs and their priorities change over time.,
For example, you sold equipment to a customer over ten years ago. Your CRM system notes list the important outcomes they needed at that time. Since then, most businesses have been going through a digital transformation and are focusing their operations on sustainability and the circular economy. This will likely introduce changes to customers’ needs.
Customers’ needs must be identified and reviewed frequently and compared to the outcomes their specific products can deliver.
There are three ways to identify customers’ needs:
- Interview each customer and observe them using the product. This will be a giant task for a successful company. However, the good news is that the rate of change is relatively slow, and you can gain valuable insights by talking with each customer every two or three years (8 to 12 quarters).
- Create customer segments based on similar needs identified during the selling process. Every quarter, you can talk with a sample from each segment and spot trends that may lead to valuable upgrades or changes to service offers.
- Annually, interview a sample of users of each of your significant products. The interview process must enable you to group the results by product age to see what performance gaps are being identified for older products. Since the number of interviews will be significantly fewer, your insights may be less valuable than the other techniques.
Finally, always meet with customers as their equipment is nearing its end of life, and they are considering alternative actions. The advantage is that you or your channel partner can advise the customer on potential actions they had not considered, like upgrades or remanufacturing.
Who Should Perform the Interviews?
A customer and competition analysis team is most valuable for performing these customer interviews. However, it adds to the business’s overhead.
Another alternative is to have the salesperson interview the customer and report the results of the interviews. However, if the salespeople work on commission, they may balk at being prevented from earning their commission or bonus. This management issue must be solved; otherwise, you will badly influence customer retention or churn.
Finally, there are always consultants.
However you decide to collect this information, you must begin soon. Remember, the goal is to provide a 15% advantage over customers’ alternatives consistently.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. We continue to provide superior solutions to meet the needs of our clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create or retain more customers, please contact us or check out some of our free articles and white papers here.