Business disruption happens when maintaining the status quo is not a viable strategy. In other words, what worked before is no longer working. And if you don’t make some changes to how you do business, you’re going to suffer the consequences.
One of the biggest disruptors today is declining customer loyalty. According to many sources, customer loyalty is at an all-time low. And the trend is not favorable. In fact, it used to be that if you took care of your customers and they were “satisfied,” you would be rewarded with their ongoing business.
In a series of studies conducted by AT&T, they discovered that if a customer was “satisfied,” that 50% of them would leave within three years. That’s half of your customers!
Why is all of this important? Due to the higher costs to acquire a customer, it is much more profitable to keep an existing client on the books. For many industries, it’s been proven time and time again that the high costs of acquiring customers means that many customer relationships can be unprofitable for the first couple of years. In fact, according to a study done by Bain & Company in conjunction with Earl Sasser of Harvard Business Review, increasing customer retention by a mere 5% can increase profits by 25% to 95%.
Adding to the rise in client defections is the fact that your customers have more choices than ever before. Further, what you proudly promote as “what makes your company/product/service different,” is probably not viewed as being all that different or better to your customer. According to research from CEB, “Over and over we found that customers see significantly less difference between us and the competition than we do ourselves.”
Now for the scary part.
Many organizations spend lots of time, money and resources creating a strong brand, along with improving their product or service. The reality is that in most cases, this just gets you a ticket to the dance. In other words, the bar is constantly being raised and to compete at all, you have to be bringing your “A” game.
And don’t think that it’s all about low prices that drive purchasing decisions. Sure, there are some consumers who always want the best deal. But if you’re pricing your products or services lower, it’s likely that your customers perceive you to provide less value. So your lower price may get you the deal but it will not get you loyalty. In fact, according to CEB’s research on the topic, only 9% of customer loyalty is attributable to a better price-to-value ratio.
So what is driving loyalty? The results are in:
- 9% value-to-price ratio
- 19% company and brand impact
- 19% product and service delivery
- 53% sales experience
Whoa! The sales experience is more important than any other factor for business-to-business sales. That begs the obvious question:
What type of sales experience is driving loyalty?
You may be thinking what many executives assume when they hear these findings. It’s all about the relationship, i.e. the relationship between the salesperson and the customer. While relationships matter in the sense that a customer is looking for a high level of professionalism and trustworthiness, those factors are not the key drivers of customer loyalty.
The areas ranked the highest for creating loyalty by clients were when the salesperson:
- Offers unique and valuable perspectives on the market
- Helps the client navigate alternatives
- Provides ongoing advice or consultation
- Helps the client avoid potential land minds
- Educates the client on new issues and outcomes
So it’s not the quality of your products or services, as much as it is the value of your insights. Are your sales reps adding value? Are they helping your customers save money, avoid costly mistakes, or see new opportunities?
In the work that I do, I have gone from training salespeople how to build relationships to how to build value-driven relationships. There are distinct differences between the two and most reps are good at the former and a little clueless about the latter. To put it in perspective, having solid relationships with your clients is good; but having value-driven relationships wins you loyalty.
From a selling experience perspective, providing quality insights are the beginning of setting yourself apart and creating a value-driven relationship. Knowing your customers and their most pressing business needs is not enough to be insightful. You must be able to provide new perspectives related to their most pressing business needs in a compelling way that actually drives action.
Do your customers seek your advice? Do you share insights that they only get from you? Is a conversation with you, a pathway to an “ah-ha” moment or just another salesperson pushing their goods?
If you’re selling, the litmus test is to ask yourself, “What am I doing to ADD VALUE?” And is that VALUE uniquely different from what anyone else (i.e. my competition) can offer?
If you’re just rehashing the same old stuff and not adding meaningful insights or if you’re telling your clients stuff they already know; that’s not insightful or valuable. I was actually meeting with a attorney who is a client this morning and we were discussing his “Unparalleled Value.” He told me that he just had a conversation with a prospect and was talking to the decision-maker when he threw out a “radical” departure from the norm – his own “Unparalleled Value.” It was his unique approach to addressing an issue that was counter to anything they have done in the past with other legal counsel. He said after the decision-maker picked herself off the floor, she said, “I need to get our CFO in here so you can share with him what you just told me.”
Great news for my attorney client as he successfully secured a new national client by setting himself apart in a way that was insightful, relevant and offered a creative and impactful way to address the problem at hand.
So before you bemoan why client loyalty is down or curse your competition for cutting rates; look at developing meaningful retention strategies (more on that in an upcoming blog post) and improving sales approaches and training for your sales team that go beyond building relationships. Remember, delivering relevant and meaningful insights and real value is your ticket for winning customers for the long haul.
