Understand Your Customer

Don Linder

Are you missing significant opportunities because you’re not applying these 7 keys to defining your true value?

A critical requirement in today’s highly competitive markets is a clear understanding of your customer’s perception of value. Understanding in depth the value your product brings to your customer will increase your success rate in selling high value products.

It's a classic Three Stooges bit: Moe holds a ladder over his head, half the ladder in front of him and half the ladder behind. Not realizing the half behind, Moe turns round-and-round whacking Larry and Curly on the head over and over again.

We do the same thing to customers all the time whenever we deliver a product without understanding the effect of that product on everyone in the customer organization. Ouch.

And, in another bit of craziness, we deliver value to customers without realizing the full value we deliver. (Sorry, no Three Stooges example comes to mind.)

While we do both – not realizing the scope and depth of our actions – at our own peril, the good news is we don't have to. We can increase our success rate in selling high-value products and can keep more of the customers we already have. Here's how.

Look at Everyone Your Product Affects

Here's an example (with the names changed, of course) that illustrates the dangers of not recognizing whom your products affect:

The Armco sales and support team lead by Bill Grainger had enjoyed an extremely successful five-year run delivering record amounts of IT support services and equipment to a large multi-national manufacturing company, Chryco. Armco had showered Bill's team with numerous recognition awards. Chryco's IT people were very happy with all the service and support Bill's team provided.

So it was a complete shock when Chryco appointed a new director of technology who promptly cancelled Armco's contract.

What actually happened? Well, Bill and his team had committed the fatal mistake of not understanding the concept of a customer's customer. The IT department at Chryco wasn't Armco's real customer. Their real customer was Chryco's Design Engineering department.

Bill and his team had never engaged with the Design Engineering department and made the mistake of not delivering sufficient value to the customer's customer. Armco's competitor had focused their selling effort on Chryco's Design Engineering department and convinced them of the higher value of their products and services.

The Harvard Business Review article "Spend a Day in the Life of Your Customers" makes this point—it's an extremely important one to remember: "Recognize that 'customer' means more than the next step in the distribution chain."

Even in customer situations where your customer uses your product internally, many organizations fool themselves into thinking that their normal contact (in purchasing, information services, legal, etc.) is the real customer. In most situations, the real customer is actually another department—production, design, distribution, etc.—and you must understand the effect of your product on the welfare of that department.

Look at the 2nd, 3rd, 4th... Tier Impacts of Your Products

Surprisingly, many customers do not recognize the true extent of a problem until they delve deeper into the consequences of the immediate, obvious problem. You can learn what value your company offers by exploring these consequences in the sales conversation.

For example, a manufacturing company that has an older unreliable production machine may view the effect of poor reliability to be simply higher maintenance costs, plus overtime costs for operators.

But the consequences of that reliability problem may include extra shipping charges to rush products to their customers, the value of the products that could have been produced during the times the machine was being repaired, delays to customers causing dissatisfaction and cancelled orders, and perhaps, ultimately, the loss of customers to a more dependable supplier. If you add up the cost of all these consequences, a solid business case can be built for replacing an unreliable machine.

Putting It All Together

Let's look at the same concepts in the real world challenge of selling to new prospects and being forced to recognize the customer's customer.

A company (Howard) that provided electronic instrumentation for large aircraft struggled for a few years in selling their products to the large aircraft manufacturers (such as Boeing and Airbus). The major competitive differentiator of Howard's electronic instrumentation was much lighter weight. But the aircraft manufacturers saw the much lighter weight as trivial compared to the overall weight of a large wide body airliner and rejected the idea of switching to Howard instrumentation.

After many months of effort with the major aircraft manufacturers, Howard's sales teams held a brainstorming session to determine what they could change to be successful.

Fortunately, one of Howard's advisors understood the concept of delivering value to the customer's customer. In Howard's case, the customer's customer was the airline that operated the aircraft. The sales team starting listing the second-tier benefits that an airline would gain from using their much lighter-weight instrumentation.

The most obvious benefit was fuel cost savings. They quickly calculated the cost savings to an airline and came up with a significant amount. With a little more prodding, they also realized that an airline could transport additional cargo instead of reducing the amount of fuel that the airplane had to load. The profit the airline would earn from transporting additional cargo was an even more impressive amount.

Armed with the outline of a basic business case and an initial sales conversation, Howard's sales team contacted a number of airlines with their value proposition.

Success soon followed. All the airlines were very concerned with fuel consumption and many saw the opportunity of transporting additional cargo. The airlines quickly began specifying Howard's instrumentation to the major aircraft manufacturers for all new aircraft deliveries.

Key Learnings

Here are some takeaways for your firm:

  1. Delivering value to your customer is possible just by having an insightful business conversation about the possible consequences of their immediate problem.
  2. You must clearly understand the needs of your customer and your customer's customer in order to deliver value.
  3. Engaging with your customer's customers may be necessary to influence your customer.
  4. You must understand and engage with customer contacts beyond ways that are familiar and comfortable. You must become comfortable in engaging a customer "high and wide."
  5. You must keep searching for the real customer and understand the value that you can provide to the real customer at every stage.
  6. To be effective at this broad coverage, you must be able to have a business conversation about the needs and problems of each customer department.
  7. You can differentiate your product, even if it’s the identical product sold by another sales channel, by your business conversations.

Use these keys in your sales process and you'll make more sales and keep more customers by appreciating the full value your firm has to offer.

 

About the author

Don Linder, the founder of Major Client Selling, uses structured tools and creative strategies to solve the complex puzzle of selling to big customers. He's the author of "The Seven Deadly Mistakes that Cause You to Lose Large Sales." You can reach Don at don_linder@majorclients.com.

 

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