10 Pitfalls in Customer Value Management
Good customer engagement strategy includes knowing what to avoid doing
Sales to new customers is the lifeblood of business. The playbook is easy to understand and leaders intuitively know what to do.
Sell more → Grow faster.
Consider that sales is not a free activity though. There is a cost of sale associated with this activity: material, resources, labour, your own time and so on.
Depending on your business model, it’s therefore fully possible that new customer profitability is negative and it may take some time to reach break-even and even longer before meaningful value from that customer relationship materialises.
In Finance, the customer profitability is known as a J-curve.
You’ll have spent expensive marketing dollars on acquiring those new accounts, so it’s important that the new accounts need to get onto the right track as fast as possible - you’ll want them to become active, engaged and long-term users of the company’s products and services.
Retaining and growing existing customers can be 5-20x cheaper compared to growing through new customer sales. This use-base becomes especially relevant if your company has not yet reached stand-alone strength and relies on external funding.
Customer engagement has been around for a long time and interest in this area has increased steadily over time. In recent years, more and more businesses have been discovering customer engagement practices as a means to find organic growth opportunities from their existing customer base.
Perhaps this development is fuelled by the increased cost of capital (interest) which is making debt-fuelled growth less attractive and companies that can offer a great customer experience and really engage customers can find ways of standing out in an increasingly competitive market and develop resilience in a tough economic climate.
Where should a company who wants to increase customer engagement and customer value start on this journey?
Businesses who wants to get started in this area are often faced with a blank canvas and unsure where to start. The choice may often boil down to focus on one particular thing or perhaps start doing some trial-and-error activities to figure out what works.
That’s going to be a time-consuming and resource-hungry exercise, but the good news is that I might be able to help you along the way by pointing you in the right direction.
Please see below the Top 10 common pitfalls in customer management (based on my personal opinions and viewpoints) that you need to avoid, along with a brief recommendation of what you might want to considering doing instead.
I hope this guidance will help you accelerate customer engagement and customer value for your business. Enjoy!
1. Not doing anything at all post-sale
This first one is little obvious but it still needs calling out! If your company does not engage with your existing customers after the initial sale at all and simply wait for the customer to reach out to you when they need something, you are missing out on a big opportunity. Don’t make the mistake of taking existing customers loyalty for granted - all they need to do is to decide to start spending their money elsewhere.
Bonus tip: Look for ways to proactively engage the customers after the initial point of sale across the full customer lifecycle.
Think: communication channels, customer touch-points, special events.2. One-size-fits-all
A common issue is that all customers receive the same treatment, whether we are looking at processes, services or solutions here. That might be a good thing or a bad thing! The point is that it might sound like the right thing to do, but from a value and customer success perspective, you are going to find diversity in your customer base as you scale, so you need to find a way to cater for different and diverging customer needs and expectations.
It will be tempting for you to use one-size-fits-all solutions as its the simple and easy thing to do, but it’s less effective and can potentially backfire on you. Look for solutions that offer the best fit to the customer needs, even it’s not the fastest or simplest solution to produce.
You therefore need to start thinking about how to SEGMENT and DIFFERENTIATE across your customer portfolio. at an early stage.
Bonus tip: Client onboarding
Use high touch-service to differentiate for the fewer, bigger and more valuable clients; use automated self-serve and solutions for smaller clients to enable scaling and avoid resource-drain.3. Cutting down on Customer Support
Support / Service is typically seen as a cost-centre, because this department usually doesn’t bring in any revenue. In an effort to save on costs, teams might be asked to more with less or be placed in low-cost locations (efficiency improvements are a good thing - to a certain point). However, be wary of eroding the coverage, responsiveness, quality and how customers respond and react to the customer service provided. Those “cost-savings” might have unintended consequences down the line if customers aren’t happy with the service, so careful measurement of customer satisfaction is key.
Bonus tip: Think of customer support as both a reactive and proactive function. Providing the customer with great support can indirectly influence your product performance KPIs (product usage, activity rates) and so on. A great quality support is also a unique differentiator and can make the customer less likely to move to a different provider. This is especially true in a world where chatbots and AI are becoming the norm, having that direct human-to-human service element will be a USP.4. Customers can just walk out the door
Many businesses are fully focussed on selling to new customers, so they don’t always see what is happening at the back-end. Customer attrition is a big problem in some industries, especially in subscription-based businesses. The typical counter-argument for why not to focus on this is that “for every 1 customer we lose, we can acquire 5 new”. This might be true, but have a second look at the J-curve at the top of this article. You are cutting future profitability potential short by not optimising for existing customer lifetime value and you need to at least try to retain. Replacing lost customers with new ones is not an attrition management strategy.
Bonus tip: Put in place a Client Retention process
Start measuring why customers are leaving, log the reasons why, develop some basic counterarguments and potential solutions to address customer concerns and just start trying to retain clients. You might be surprised at how much can be achieved with very little. Just try it and start. 5. Repetitive ‘push’ marketing to sell
Your business is probably good at selling to new customers, so upselling and cross-selling to existing customers comes natural too. It’s fairly easy to figure out and companies are routinely sending out offers via different marketing channels. This is high-volume, high-cost and low ROI - but it works nevertheless to bring in the numbers. The main issue with it is that it’s typically all push messaging and/or using outbound channel. If this is the only way you are selling, you are going to start turning people off and over time, you will potentially run into issues with marketing opt-outs and have fewer clients to communicate with over time.
Bonus tip: Striking a balance is key in customer engagement, so consider selling in new ways. Explore inbound sales where you upsell and cross-sell on servicing calls. Also use ‘Pull’ marketing for softer messaging to influence client and buyer behaviour to draw the customer towards brand and propositions. Offer freebies, perks, invitations without expecting something immediate in return and focus on the long term.6. Manual processes
Speed of execution is often the norm in business, but can often lead to opting for manual operational processes and work-arounds which are complex, labour intense and time-consuming. As a short-term fix, that might be fine - but chances are that your long-term fix isn’t going to happen any time soon. The manual workarounds might be fine if volumes stay low, but it can become a bigger problem as companies scale. The combination of manual process and wheels that are spinning faster and faster will lead to human errors and mistakes being made. Similar to my point on customer support, there is also the risk of downstream impacts on the customer and the customer experience from relying on manual workarounds and manual processes.
Bonus tip: Automate from Day 1 and resist the temptation of launching something with manual work-arounds that promise automation as a Day 2 requirement. Day 2 may never happen and you’ll be stuck in limbo for quite some time, and as your company scales, your manual resource requirement is unfortunately going to have to scale alongside it. Manual processes are the anti-thesis of scaling. So, automate from the start even if it takes longer to launch.7. The biggest customers gets all the attention
It makes good business sense to serve your most important clients well and to manage those clients that generate most revenue for your company. It might be tempting to focus exclusively on the biggest customers as they are so high-value and demanding. Particularly if you have one or two really big customers that bring in most of the business, they might get dedicated account managers which is perfectly logical, but again - there is a risk here that you are going back to the very first point in my list: “No post-sale customer management” which is a concept needs to be viewed holistically for all customers (albeit managed directly or indirectly in different ways).
Bonus tip: This point is really about diversification of income streams and making a bet on current vs future opportunities. By not putting all your eggs in one basket and spreading out your focus and efforts a little bit more, you are planting seeds and nurturing opportunities that you will be able to reap in the future.8. Not connecting the dots
In an effort to deliver great customer engagements and marketing campaigns, it will be tempting to do more and more to drive more revenue. How this might pan out is that you are trying to accelerate things by going faster and launching “one idea at the time”. This might seem like a great idea when viewed in isolation, but what is missing is a top-level view of the overall customer experience and what the customer journey will look like through the eyes of the customer. Overly frequent customer communications and too many customer touch-points may end up having unintended consequences.
Bonus tip: Assess your business efforts from a “single customer view” and work your way backwards. If you are a big company, there may be different projects and departments interacting with the customer that you are not aware of - map all the touch-points and the overall customer journey from the customer’s perspective. Not the business’ perspective.9. Disconnect between new products & new offers and existing customers
New product launches and special promotions are routinely offered to new customers only. As consumers ourselves, how often have we not received a direct marketing flyer which suggests the offer doesn’t apply to you as you are an existing customer already? Not a great customer experience.
The company logic behind this is that the discounted rates on new products shouldn’t cannibalise on existing revenue (i.e. your existing customer is currently paying a higher price on a similar product). Financially that makes sense short-term, but the issue is that your customer base is going to hear about these new offers sooner or later and they will not be happy with a two-tier pricing system where the value on them appears less worth than a new customer. Potential impacts of this is that it leads to customer unhappiness, and they might be heading towards the exit sooner than you’ve hoped. Either because they are leaving for real, or, they just close to re-sign as a new customer to beat the system you’ve just created. The hallmarks of a broken process are when a customer tries to circumvent it.
Bonus tip: It’s a good idea to create cross-functional working groups and align your Product, Commercial and Finance teams on this type of projects. When launching a new proposition and offer, consider the implications of that GTM launch both in terms of new customers and how it will impact the existing base. 10. No big vision for the future
Running a continuous improvement agenda and implementing gradual 1% improvements over time can be powerful way to drive commercial results and customer success. I’m personally a big fan of this technique.
However, juggling both “tactical” vs “strategic” work and improvements can be a challenge, and sometimes the busyness of things can take over and the “here-and-now” usually wins based on the most urgent priority and to the detriment of being able to step away from short-term priorities and focus on the more long-term, innovative and transformational changes.
Bonus tip: Segregate the duties between tactical execution vs strategic priorities between different team members, alternatively ensure you ring-fence and protect your own time and are able to spend time on those strategic projects when you can step away from the day-to-day and think about those "What if?" scenarios that could transform your business.That concludes today’s newsletter and I hope you enjoyed reading it.
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