The Cost of Customer Management No One Talks About
Jermaine Edwards
Teaching CEOs and Customer Leaders how to build organisations their customers never want to leave | Customer Strategist | Advisor | Author | International Speaker | Investor and CEO of Irreplaceable Advisory Group
WARNING TO 'KEY ACCOUNT LEADERS'
How much is it costing you to support, retain and grow your customers?
There is an unseen, and undervalued, reality of the cost of customer development. Especially for those customers who just aren't interested in partnering. Those customers cost us more than just money but time, energy and unnecessary stress.
I bet, even with some of your best customers, your departments run customer programmes with little success. Your teams feel stretched, sometimes underappreciated. It can feel like they're working harder only to get the same or marginally better results.
This is a symptom of R.A.S moments (Random Acts of Success) results that are obtained but are often not attained at the same level or ever again because no one really knows how they got there. If unchecked this for many leaders and their teams lead to R.A.F moments (Recurring Acts of Failure or Frustration).
At it's root it is an organisation not knowing what is essential to the effective management and partnership with its customers.
Instead, when customer results aren't where we want them to be we default to increasing our costs. Our costs in activities, resources, energy, time and investment. This is an unhealthy cycle. Many key account leaders miss a critically important question.
What is most essential for us to generate results with, and for, our customers that is mutually valuable and profitable?
I do want to be clear. The cost conversation is not about how we suck more money from our customers.
It's actually about understanding what gets in the way of us delivering greater value to our customers. Where do we feel we're overspending with little return?
We need to know what really drives results and identify the areas that are recognised as most valuable by our customers.
Here's the tricky part.
Evaluating the cost to managing customers can vary greatly over time and it can be hard to quantify. But they tend to fall into five buckets.
??Presale costs - Customer Acquisition Cost or Pre renewal cost
??Production costs - Cost to production of service
??Distribution costs - Delivery of service
??Post sale service costs - Support of services
??Labour costs - Growth of support (not always revenue producing)
What do these five buckets tell us?
Actually, quite a lot! (I'll address all five in another article)
An article from Harvard Business Review some years back spoke to the challenge of customer profitability. What is clear from their research and what we've evaluated with our customers is that companies around the world could be spending as much as 2x it's customer revenue in hidden customer management costs over the lifetime of a customer.
If this is true, there's tremendous opportunity for improvement and value you can bring back to your organisation and your customers through more effective management.
If we fail to recognise the reality of these costs, the unseen impact could be
Beware the 'Customer Service' Bias
I mentioned earlier that when we desire better results with our customers we default to increasing our costs in activities, resources, energy, time and investment. This is an unhealthy cycle.
We often justify those costs without a real evaluation of mutual value.
We end up giving it a name like 'enhanced' customer service. It becomes another inputted cost that we do not quantify.
We're so focused on the activity of customer management we rarely step back to ask, what is most essential? And what do our customers actually value from what we're doing?
Guess what?
As much as I'm asking you to think about this your customers are asking the same question about the activities you're doing. The hard truth is...
Your customers only recognise 10% of the activity you do.
What do we do?
1. Be honest with where you are with your customers and how much you're really putting in. (This is part of what we call 'knowing the Customer Picture')
2. Conduct a proper segmentation exercise.
3. Pinpoint your costs.
4. Understand the real ROI.
5. Understand what your customer values about the areas you've identified.
6. Focus your strategy.
7. Provide appropriate support and enablement systems for teams and customers.
8. Repeat analysis regularly.
Next Steps
You can't convince every customer to partner with you.
However it is possible to enable a high percentage of your customers to grow with you each year.
You can do this without having to pour in huge amounts of time, starting new loyalty programmes or expensive events.
You must first get the most accurate picture of your customer possible.
Here's a challenge to you:
Ultimately, as a Key Account Director you must shift your perspective before you shift your activity. New results are in your grasp.
Your thoughts?
Do you agree, disagree. I'd love to hear your thoughts.
Jermaine Edwards
Founder of Customer Mastery and the Irreplaceable Advisory Group
#keyaccountmanagement #customergrowth #customerrelationshipmanagement #customersuccess