The phrase customer relationships has suffered so many misuses, abuses, and thrashing in the past few years, that I am almost afraid to use it.  Yet, we all know that there is no business without customers, and taking care of business really means taking care of your customers. 
 
We’ve already written in past articles about the power of customer intimacy as a competitive strategy for smaller companies.  In this article, we’ll get into some of the ways you can apply this strategy. 
 
Why should you take care of your customers?  It’s not that you have to; I am sure we can all come up with plenty of examples of companies that don’t. 
 
There are even some good reasons why you might invest your resources elsewhere, especially if you sell fairly expensive software licenses with high switching costs.  After all, your customers may have just purchased a license to your software for a considerable amount of money, and chances are they are neither going to buy much more in the very near future, nor are they going to switch to your competitor anytime soon.
 
Still, you should take care of your customers because it’s a good business decision, and there are many reasons why:
 
Revenues/ Cash Flow: While it may not seem so when you have a small number of customers, maintenance fees can eventually be a significant portion of your revenues.  Managed correctly, they can provide a reliable stream of predictable cash inflow when other sources slow down.  See more about it in Philip Lay’s article below.
 
The impact of customer relationships on revenues and cash flow becomes further crystallized and more direct when you adopt the software as service model.
 
Solution Expansion/ Share of Wallet: As we discussed in previous articles, smaller enterprise software companies do better by focusing on providing a point solution, matching the scope of the solution with the size of the company.  When the time comes to expand the solution, your existing customer base is the most natural target, provided you have the relationships in place.
 
I have recently met with an enterprise software company that has been in business for over ten years and has sold software to practically every Fortune 500 company.  Yet, the company had virtually no relationships in place with any of these customers.  And although the company has developed many additional products throughout the years, repeat sales to existing customers were one big zero.  One can easily figure what an impact this failure has had on the company’s growth and cost of sales.
 
Sales to New Customers: Existing customer success stories are the most effective marketing and sales tool you can have in your arsenal.  Having the references in place increases conversion rates of marketing and sales activities and can dramatically compress sales cycles and reduce the cost of sales. 
 
 
Taking Care of Customers – The Case of Cimatron Technologies
 
Cimatron is a CAD/CAM software provider to the tooling industry worldwide, with over 1,000 customers in North America alone.  When Sam Golan assumed the management of Cimatron’s North American subsidiary, he knew he’d spend most of his time ramping up sales and marketing.  But Sam’s first priority was taking care of Cimatron’s existing customers.  
 
Support Enhancements
 
While Cimatron was already known for its highly dedicated customer support personnel, it lacked some basic tools to provide this support in the most effective manner.  One of the challenges in supporting CAD/CAM software is the large size of the files that need to be sent to the support desk for problem analysis.  Now, instead of having the customer e-mail or upload the files, Cimatron support personnel is equipped with remote support capabilities that enable them to view the files and analyze the problem directly on the customer machine (only with the customer’s permission).
 
Sam made sure everybody in the company understood that customer support is number one priority.  On one occasion, just as all the employees were getting ready for a company meeting, he sent all of them to help the support desk people close as many calls as they could before proceeding with the meeting agenda. 
 
Maintenance Contracts
 
Once he felt confident enough in the level of support the company could provide, next step was to communicate it to the customers.  A new maintenance contract was drafted just in time for the 2004 maintenance contract renewal.  The contract spelled out specific commitments to set clear expectations between the company and the customers.  The new contracts were sent accompanied by a personal letter from Sam, reaffirming Cimatron’s commitment to it customers and to support excellence. 
 
Newsletter
 
Next in order was strengthening customer communication and the sense of community.  Cimatron has already had a fairly active online user forum in place.  Sam felt that a monthly newsletter would do well to enhance and broaden ongoing communication.
 
The first issue of the new customer newsletter went out in November of 2003.  The newsletter, Tooling Times, is not a promotion for Cimatron or its product.  Rather, it features articles on industry topics that are close to the hearts of Cimatron’s mold and die maker customers. 
 
The newsletter has been well received.  Open rates for the first three issues averaged over 65%, and click through rates have been over 35%, way beyond the rates common for similar company newsletters.  “The fact that we received such enormous response validated my belief that our customers were looking for us to communicate with them more often,” says Golan.
 
Customer Survey
 
Communication goes both ways, and Sam was eager to hear more from the customers.  In addition to visiting many of them in face to face meetings, a brief and focused customer survey was sent out to get a broader picture of customers’ attitude towards the company and uncover specific issues and concerns related to Cimatron’s products and services. 
 
To expedite response and reduce the cost of administration, the survey was posted on the web, and e-mail messages were sent to the customers with links to the survey.  While the results are still being analyzed this article is written, response rate to the survey has exceeded 12% within less than 24 hours of its release – again, a great response rate.
 
Although respondents could remain anonymous, over 80% provided their names and contact information.  It helped that Cimatron offered a digital camera to be drawn among those that did.  A majority of the respondents said they’d be willing to answer more detailed questions over the phone, and Cimatron plans to follow up with those that agreed.
 
Sharing Knowledge and Success
 
There is more in store.  Cimatron already has a web-hosted knowledge-base with problem resolutions and technical tips.  They are now working on adding web-based training courses on specific applications of the software.  And in March, Cimatron is launching a webinar series, featuring industry experts and Cimatron’s customers, who will discuss common challenges and offer strategies for overcoming these challenges.
 
While none of the steps taken by Cimatron is unique on its own, it is the intensity and the purpose in which they have been launched in such a short period (less than four months) that make this customer outreach effort stand out.  Cimatron did not have a huge budget in place to make these things happen, so most of the effort has been accomplished using internal resources.
 
How will all this effort pay off?  It’s too early to say.  I, for one, am sure it will; we will keep you posted so you can judge for yourself. 
 
 
What Can You Do?
 
Taking care of your customers can be boiled down to three simple points:
 
Support: while it may seem an obvious one, there are ways to make support really stand out.  As one Cimatron customer noted: “the great support alone would be a reason for me to select Cimatron.”
 
Communicate: customers are more eager to communicate than you might think, as long as you give them control (permission-based communication) and don’t turn every communication into a sales pitch.
 
Provide a Community: having attended one of Cimatron’s regional user groups, I got a strong sense that customers really love to interact with each other.  I am seeing similar evidence elsewhere: registration to a user group meeting held by another enterprise software client is exceeding expectations; other clients report highly successful customer advisory board meetings; and following a webinar series last summer, we received a request from one of the participants to start an ongoing member forum. 
 
The next article tells the story of Harley-Davidson and its owner group.  Can you make your user group something similar to HOG?