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?
