In earlier posts I have discussed the simplified economics of maintaining and expanding existing business and customer relationships. Despite the wisdom and the accuracy of this premise, I continually finding myself educating business owners on the financial benefits of investing in maintaining and improving customer relationships as opposed to investing in salespeople to find and acquire new ones.
The following is an account of a recent experience where a business learned this lesson in a very expensive way. Fortunately, we solved the problem before it cost them more.
I was working with a customer who had brought me on board specifically to help him recruit, develop and manage his sales team. Most of his existing sales professionals were experiencing massive sales declines (35-60% over three years) and he wanted me to bring in some new members to his team as he was convinced the existing ones weren’t working hard enough.
One of the first steps in all of my engagement programs is to go to the source for all information about the business — the customer. I brought the owner along as the interested party and provided him with three simple questions to ask his best, most loyal, biggest, and most profitable customers. All of these customers were spending around 50% less on average what they had purchased in the past.
What we learned was that it was not the economy that lowered customer orders, despite what the sales team was saying. Instead, the customers had all become very frustrated with the customer service department (run by the owner’s brother-in-law) and had taken what business they could to other suppliers. All this business was now providing their customers were products that his customers believed they could not get elsewhere. It was not the economy or, arguably, the sales team; it was the customer service department that had eroded the business.
Four lessons were imparted on this business owner through this experience:
- Get in front of your customers. This is not a job for a marketing survey or the salespeople, this is a job for the owner/executive. They will tell what you need to know — provided you ask them.
- Value your existing business. Know why they bought from you, why they buy from you today, and what they value. If you don’t know this, you do not know your business.
- Educate your sales team. Too much time, effort, resources, and energy is spent telling salespeople to go get new business. The expense of this push is their limited understanding that new business and better business can be derived from existing customers much more easily than from new provided they have the relationships to do it.
- Don’t hire family to run or ruin key functions. Just kidding. Hiring family is a sensitive area and I will leave those decisions and risk up to each of you.
Good customer relationships are hard to form and easy to destroy. Treat them like gold and they will increase in value like gold.