Your Stealth Customer Attrition
Published Articles
Published in: IPA Bulletin, July/August 2007
Buyers are expected to manage more, faster, and with increasing complexity. Wrong purchasing decisions, such as a change in suppliers, have disproportionate penalty costs.
In this article we reveal evidence of a market condition and trend we repeatedly gather information to support. That said, we also repeatedly experience that the organization capable and willing to act on the evidence is rare.
Most decisions to consolidate suppliers are made at the executive committee level.
Issues we intend to "connect" to identify a fundamental cause of customer attrition include:
- Customers' enlarged buying centers,
- Confidentiality of customers all-important databases,
- Direct marketing and personalization,
- Customers' preference for one-stop-supplier sourcing,
- Periodic Business Reviews, and
- Major customer surveys.
Customer & Market Conditions
We need to reach agreement on market and customer conditions. First, no change in supplier occurs without some form of "huddle" by a customer's executive committee. Young (and sometimes not-so-young) buyers are expected to manage more, faster, and with increasing complexity. Wrong purchasing decisions, such as a change in suppliers, have disproportionate penalty costs. Inevitably, key positions that a buyer serves want a voice in supplier selection, consolidation, and awards. We refer to this as the enlarged buying center.
Second, customer organizations in general, and marketing departments in particular, consider their customer lists, and target prospect lists to be highly prized and confidential. Generally speaking, they do not want such proprietary, invaluable information treated casually among two, three, four or more suppliers. Preferably, only one supplier should be allowed access to such information - and only after signing a strict Non-disclosure Agreement (aka NDA) that has penalties. (Be prepared to show your personnel policy on how clients' confidential information is treated.)
Third, buying departments have been working to consolidate suppliers - a trend that is expected to continue. Such suppliers - a trend that is expected to continue. Such supplier consolidation speeds up execution, increases the value of the customer to the supplier, requires less of the buyer's time, and inevitably lowers the cost per value received by the buyer. Such actions also tend to increase revenues and profitability - and cash flow - of the buyer. Note: after consolidation, customers tend to change suppliers less often!
Fourth, most supplier reps are calling on buyers. However, an increasing number of percentage of prospects emanate directly from the marketing department.
Fifth, most buyer decisions to consolidate suppliers are made at the executive committee level. The last one to know that a consolidation or change in suppliers is occurring is the supplier who is being replaced.
Connecting the Dots
In conducting major customer surveys for clients, we have learned to ask a series of relevant questions that reveal either strategic opportunities for additional business or strategic threats to current business.
Surveys are sent not only to the buyer(s), but also to everyone who is believed to have influence over a buying decision. This part of the process is where "the enlarged buying committee" comes in. Some customers may receive five to seven (or more) surveys. (This is a key, though it makes our creating a 30 percent plus response rate that much more challenging.)
A sample question might read:
What percent of your commercial and variable imaging print requirement does (name of sponsor to the survey) currently receive?
____ 0-20%, ____ 21-40%, ____ 41-60%, ____ 61-80%, ____ 81-100%
Frequently, since we can identify who each survey comes from, we learn that the survey sponsor is:
- Receiving noticeably less business than they thought they were receiving, and
- More easily replaced and less important to the customer.
However, a more central issue we attack in the survey revolves around a series of questions that can lead to strategic opportunities and a "wake-up call" regarding a company's economic future. For example:
A. Do you have an interest in consolidating your supplier in the next six to eighteen months in order to increase speed of execution and value/cost received?
____ Yes ____ No
Comments:
B. Do you have an interest in consolidating your print and storage and fulfillment requirements with one supplier?
____ Yes ____ No
Comments:
C. Do you have an interest in consolidating your variable imaging and personalization requirements with one supplier in
order to better protect the confidentiality of your information?
____ Yes ____ No
Comments:
D. Do you intent to increase your use of variable imaging - such as for fundraising or short-run publishing - over the
next six to eighteen months?
____ Yes ____ No
Comments:
E. Do you prefer to place your print requirements through a web-to-print (internet based) technology?
____ Yes ____ No
Comments:
F. Would you prefer to have your graphic images managed by an outside supplier (a.k.a. Digital Asset Management) in order to improve image integrity, image organization, use of subcontractors?
____ Yes ____ No
Comments:
G. If you answered "yes" to any of these questions, may we have your phone number, name, and when is the best time to follow-up?
Shocking But Predictable Results
In general we receive multiple surveys back where multiple surveys were sent. However, responses do not match-up, which we expected! More than 40 percent of responding customers to our client survey says "yes" to at least one part of that series of questions. Often, more than one part of that series of questions receives a yes.
Our Fundamental Premise
Customers do not want more than one trusted supplier having systemic and frequent access to their most highly prized information - their customer and target prospect names.
The process of selecting that supplier must most likely occur at the executive level (a.k.a. the enlarged buying center). Or, said somewhat differently, most suppliers don't know who at the executive level is thinking in strategic terms, on which issues until after a decision is made.
Armed with "who said yes to which questions" our survey sponsor can proactively follow-up.
Critically, it is our observation that whoever is first selected to do any of the following is the supplier most likely to be offered all subsequent required services:
- Manage graphic images (a.k.a. D.A.M.), or
- Manage print and storage and fulfillment, or
- Manage web-to-print, or
- Manage personalization or short-run publishing.
Testing Customer Issues Is Critical
Testing day-to-day and strategic customer issues is no longer "nice to do." We believe it is not only required, but should occur every 15 to 18 months.
However, don't conduct your customer survey unless you are committed to follow-up. By asking such questions, you inevitably elevate your customers' expectations.
It is our observation that customers are continuing to consolidate suppliers. However, the "prime movers" issues on which supplier consolidation selection most often occurs in the customer organization now includes "Confidential Information." Additionally, the executive committee's influence is profound.
Postscript: We have repeatedly offered to present these issues that should be incorporated into customer surveys at Graph Expo. For reasons we cannot yet discern, that they have not accepted.