Published in:
Printing Industries of America, Inc., Sales & Marketing Advisory, December 1998
Graphic arts companies have generally measured customers' value by profitability and volume -- in dollars. Customers are also measured by an invisible but recognizable "difficulty factor." Almost everyone in a printer's organization knew each customer's rating by this invisible "grief barometer."Accounting or shop-floor reporting systems supported this type of evaluation. Informal discussions might be overheard, such as: "What kind of customer are they? Oh, they buy about $50,000 a year. Not too bad."
But in today's business environment, it's the frustrated, predictably underperforming organization that narrowly evaluates its customers based on sales volume -- or grief. From a different business viewpoint, there are other approaches to valuing customers; approaches that should be taken by everyone in the printer's organization.
To an increasing degree, graphic arts companies who recognize the legitimacy of customer-valuation issues beyond dollars spent can predictably make wiser, more effective decisions as they guide their company's journey through uncertain and ever-changing times.
What you might learn
Many graphic arts companies that have developed unusual niches or market differentiations -- almost always requiring innovative configurations of technical resources and skills development -- did so at least in part from the influence of a customer who desired "something different from the way we've done things in the past." A few marketing purists offer that almost every major product or service development in our industry was initiated by collaboration with customers.
Factors often critical in such "developing situations" include:
- key personnel in the printer's organization listening and interpreting a customer's changing needs;
- the customer, for various reasons, having significant influence with the printer regarding needs that were different from the norm; and
- the printer not necessarily knowing where such a journey of changes might lead, or what such unknown steps might eventually require from invested time and effort.
Ultimately, such new directions often led to one or more meaningful and profitable new business markets and/or products or services. There are other valuable things to learn from a customer. Other examples include:
- a customer's market trends and innovations impacting and revealing future opportunities;
- changing customer market needs and expectations, and
- development of mutually useful technologies with broad applications.
Many, if not most, graphic arts companies experience such opportunities, but it is the rare company that requires a write-up, submitted to the president, of all customer requests that the company doesn't respond to -- thus pointing the way to new and evolving business opportunities.
Servicing and order-entry reductions
Estimating, order entry, and customer servicing activities are too seldom evaluated in terms of their impact on a printer's bottom-line performance. But there's broad evidence that this area of costs for most printers is all but out of control. (Shop-floor data collection systems don't include this information, so it must not be relevant!)
- Is there an overall plan for development and maintenance of customer relationships?
- How is customer feedback captured? How is it used?
- What types of businesses are in the customer base? Has there been any testing or review of additional services these customers might be interested in? What is this company's vulnerability to a competitor offering such services?
- Which customers are utilizing services such as an electronic image storage, mailing, and fulfillment that help secure the flow of future work?
Again, what we're addressing here is understanding "the reasons behind the results" that are being experienced and tying that information to a marketplace in which major customers are consolidating their vendor lists. Any potential determination of value or future performance, in today's marketplace, needs to look far beyond the book value or net worth of the company to the forces that are driving performance. If those forces are out of position with a changing marketplace, current performance results may be an aberration on the "radar scope" of performance.
Employees
Very few organizations recognize the elevated value in a company that is created by purposeful, ongoing education and training. I say purposeful, in that education and training need to be "grounded" in performance improvements that affect the customers' experiences. Keep in mind that you are evaluating the skills and competencies of a workforce (team) that may have taken years -- sometimes decades -- to develop. Additionally, the development of employee skills affects attitudes and performance, particularly concerning what customers experience and come to expect.
Employees' attitudes, understanding of customers, and respect for supervisory authority can also take a decade or more to develop effectively, yet they are seldom examined. As an example, I recently worked with a company that had one of the brightest workforces I'd ever experienced. On average, they produced and shipped 20 to 25 percent of all their work on the same day they received the order. When questioned on his hiring practices, the president responded, "We started administering potential hires a math and spelling competency test in 1975. It has slowly made a difference over the years in what we've been able to accomplish." Here is another example of a qualitative issue (having a literate workforce) that is driving performance and could be very meaningful for determining a company's potential for improving its future performance.
A few questions and issues are worth reviewing. These questions could help determine an organization's attitudes that will influence its future performance potential, and individuals' attitudes toward supervision, ownership, customers, and other departments.
- What are employees' attitudes toward management/ownership?
- Is management perceived as a reliable source of information?
- Do employees perceive that they are paid fairly?
- Are there opportunities and encouragement to improve skills?
- How are performance reviews administered? Is there a central purpose or focus in the reviews?
- What are employees' attitudes toward customers?
- What is the rate of employee turnover?
The value qualitative issues
These questions are meant to raise your awareness of the presence of critical, qualitative issues that directly affect a company's potential future performance and value, impacted by an ever-faster pace of change. These types of issues are having an ever-increasing impact on what a company can expect for its future performance.
Let's look at an example for contrast and illustration. Imagine two companies with similar equipment configurations, customer bases, and bottom-line performance. In Company Number One, ongoing employee education and training has come to be expected by its team of top-performing employees -- and by its customers -- and is a cost of doing business. This company invests approximately 2 percent of its revenues in ongoing employee training, skills development, and education. Company Number Two invests a minimum amount in such activities. Question: "Which company has the higher probability of a strong and dynamic future?"
The critical observer must look beyond the bottom line to understand "the reasons for performance," in order to accurately assess the value that is being created.
