Customer Value Management: Pick n' Mix
An assortment of existing customer management tactics to fit every taste
Who doesn’t like a good Pick n’ Mix when it comes to candy.
Which of the five basic tastes do you prefer: sweet, sour, salty, bitter or umami?
(I had to look up umami in the dictionary to be completely honest. Apparently it means ‘savoriness’ in Japanese.)
Today’s newsletter on Scaling Customer Value will give you an overview and a Pick n’ Mix of different ideas, concepts and tactics within the existing customer management field to help you drive more customer value faster.
I will briefly go over a few of the key ideas and concepts that have been covered in more detail in previous newsletters. I will also throw in a couple of my favourite quotes about customers from others for added inspiration.
This will be useful repetition for existing readers and to take stock of where we are at in our learning journey.
If you are brand new to this newsletter, this summarised content will give you a good initial overview of how to drive value for and from an existing customer base.
The Rise of Existing Customer Management
Sales is easy to understand. Everybody gets it. I’ve not met anyone who questions the value of sales.
Existing Customer Management, on the other hand, it’s a completely different beast. It’s a mix of art and science.
It’s difficult to conceptualise, difficult to execute, difficult to measure. Difficult everything. Although good things don’t come easy!
There aren’t many guaranteed ways or shortcuts to drive revenue from existing customers, possibly except from raising prices but that is a generally a bad strategy to rely on.
Yet unsurprisingly, it might be the first thing that comes to people’s minds when someone talks of “customer value”.
This is the level of misunderstanding of this business discipline that we’re dealing with here. For the record, we’re trying to drive customer value for the customer and not for the business (although there is a connection between the two).
For a business that gets Customer Value Management right, the business impact can be transformative and this field of expertise seem to be gaining awareness and in popularity.
To get our heads around some of the key issues and opportunities in this area, let’s have a look at what a hypothetical dialogue between a senior leader and a customer value manager might look like:
CVM Analyst: How’s the growth figures looking for the year head?
Senior Leader: Sales pipeline is looking strong. New customer turnover doubling year-on-year. The company is growing and we’re gaining momentum.
Analyst: How does the growth figures look like for the existing customer base?
Senior Leader: Can you check with Analytics on this?
Analyst: I got the figures you asked about. The total turnover / spend in the existing customer book is declining by -10% every year.
Senior Leader: Our new sales volumes make up for the existing customers we lose, so it’s not an issue. We lost 100 customers last year, and acquired 200, a net gain of +100.
Analyst: How much of your total turnover come from new vs existing clients?
Founder: We have a lot of existing customers who have been with us for many years and they make up 80% of the value. It’s because their businesses have grown a lot since they first joined us many years ago. New business makes up only 20% of the value and we have many smaller clients joining us.
Analyst: Taking both volume and value into account, the sales volume increase from the new customer base will need to ramp by 4x in order to just offset the 10% turnover decline from the existing customers. This is a very optimistic sales scenario which basically means zero overall growth / holding steady. You’re going to need a complementary growth plan in addition to the new sales pipeline.
Senior Leader: Good man. Makes sense to focus more on existing customers then. How can you help our company with turning existing customers into the primary growth engine for our business?
Analyst: Well, funny you should ask about that, it’s my field of expertise 😊
Basic concepts in customer management
With the risk of this turning into a protracted dialogue between two fictional characters - I’m going to stop here for now.
This is really just to illustrate how people often default to what I call the ‘Shiny Object Syndrome’ and take the possession or loyalty of what we already have for granted.
In business: new sales, new customers, new products, new partnerships, new innovation. It is simply so much cooler and sexier to focus on new and flashy things rather than pursuing gradual and incremental continuous improvements of what is already have in the books.
Nevertheless, this is the name of the game within this field. There is massive power in doing many small, gradual, continuous improvements over time — especially when applied to a very large existing customer base. This is the effect of compounding, combined with the movement and acceleration of a heavy mass.
Let’s look at introducing a couple of basic concepts in customer management for now. Here are a few key things you need to be aware of:
Data distributions for new vs existing customer proportions - volume and value
Customer segmentation
Separate between revenue, cost and profitability
Take caution in overly relying on average values and be aware of data distributions
New customers are the lifeblood of business, but existing loyalty can often be taken for granted
Initiatives can default to ‘one-size-fits-all’ because it’s convenient for the business
Different components in the customer portfolio can come in different sizes, move at different speeds and create very different impacts/outcomes for the business
Be aware of different lifecycle stages and degrees of customer maturity levels
How to increase customer growth, engagement and client retention & renewals
Applying some of the structure and ideas listed above, here is a quick 5-minute brainstorming list with different potential activities that you might want to consider testing in your business.
From the list below, I encourage you to look through everything and then choose your Top 3 activities that you think could make the biggest difference in your business. I’ll come back to this point towards the end of this post.
Onboarding
Gather customer feedback on the main customer training needs and FAQs.
Document these things in writing to enable future distribution of the same content (PDF training doc, Knowledge Library on the company home page etc).
1:1 client onboarding session - make sure you do at least one client-neutral digital recording of these to avoid getting stuck in a loop of having to deliver these manually for each client.
This is a good moment to gauge opportunities for testing the waters on upselling or exploring early future needs, as the customer will be at the maximum point of engagement.
Activation
Welcome the client formally - email, phone call, face-to-face client meeting.
Engage with customers who are early adopters and already using your product, to drive even more activity.
Engage with customers who have not started using your product, to drive some initial activity.
Early engagement is key and a golden opportunity not just to drive business activity, but to spot potential issues and gather product feedback.
Build on the customer engagement momentum and offer incentives, rebates, offers and discounts to get this going to build habit-forming.
In-Life
Raise prices to drive revenue.
Cut prices to defend revenue.
Invest in great customer service.
Upselling and cross-selling initiatives.
Engagement campaigns to build awareness and drive activity (new features, customer rewards).
Inactivity/Dormancy
Early engagement is key - identify customers who start dropping off in activity / spend levels.
Proactive customer outreach to stimulate activity and re-engagement.
Re-sell the benefits of the product/service
Segment your approach - email/digital for large-scale volumes, whilst saving the higher-cost interactions (e.g. outbound call / personal outreach) for customers that have higher actual value or potential to become so.
Retention
Log the reasons for closure and start measuring root causes of attrition.
Develop solutions that will prevent or stop those reasons from occurring.
Try to proactively identify customers ‘at risk’ of leaving and reach out before it happens
Reactively try to stop customers from leaving. Ask for feedback, convince them to stay and have an attractive offer ready to entice them.
Read the content of your customer complaints carefully and listen to what customers are saying about your business. Use this as an opportunity to improve.
Inspiring quotes about customers
“Customer will create most value for you at the point he thinks you’re creating most value for him.”
— Don Peppers
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
- Sam Walton
“Customer service shouldn’t be just a department, it should be the entire company.”
- Tony Hsieh
A key consideration in Customer Management
Now, I have a question for you.
Thinking about your Pick n’ Mix of customer activities. What flavour do you revert to?
As with the sour, sweet or salty candy — you’ll find different categories and themes across customer activities.
For example, we can separate between Push and Pull initiatives (Promotion vs Engagement). Or in other words, it’s about whether we are doing something to the customer or trying to pull the customer in through subtle influencing.
Look back at the 3 different type of initiatives that you have chosen to focus on and try to identify which themes and lifecycle stages they belong to.
Are they Push or Pull? Do they focus on driving revenue, growth or engagement? Proactive or Reactive? Early lifecycle or late lifecycle?
What does your choices say about your preferred customer value management style?
Ideally, you’ll want to tailor your activities to where the key issues are in your business, and the same time ensure a healthy balance across the board and addressing current issues vs preventing future issues — and most importantly, be really clear on what the driving force behind your actions are.
I hope found this content useful today and I would appreciate if you do your magic on the buttons below please ✨
Thanks everyone and I’ll write to you again next week!
/Jens
PS - if you want to dive further into the last point I just made around ensuring a healthy balance of different types of activities and clarity on the driving forces behind your chosen actions, you may also find the following article of interest:
