CP Book - Part 1 of 2

8/6/2019 CP Book - Part 1 of 2

1/139


2/139

CUSTOMER PILLARSNine foundational business building principles which dictate the revenue andprofitability progress of every successful company

Curt Clinkinbeard

Strive Publishingwww.customerpillars.com

CUSTOMER PILLARS. Copyright 2008 by Curt Clinkinbeard. All rights reserved.Printed in the United States. No part of the book may be used or reproduced inany manner without written permission except in brief articles or reviews andwith author citation.

For more information, visit www.customerpillars.com, [email protected],Strive Publishing, Topeka, Kansas.

FIRST EDITION

Library of Congress Control Number: 2008904394

Clinkinbeard, CurtCustomer PillarsNine foundational business building principles which dictatethe revenue and profitability progress of every successful company / CurtClinkinbeard.1st ed.

ISBN 978-0-9769064-1-4

1. Entrepreneurship. 2. Small BusinessManagement. 3. Success in Business. 4.Marketing

10 9 8 7 6 5 4 3 2

Editor: Libby KoponenCover/Illustrations: Curt Clinkinbeard & Carl MastersAuthor Photograph: Dan MauerPage Layout: Digital Dragon DesigneryProofreader: Kathy Foster

The contents of this book should be considered management thoughts, suggestions, andinsights, but do not abdicate the individual businessperson from making intelligentdecisions for running their specific business in their specific industry. The goal of thebook is to help the reader capitalize on opportunities, but does not reduce or eliminate the

personal responsibility for decisions made in a business.


3/139

WHAT OTHER PEOPLE ARE

SAYING ABOUT CUSTOMER PILLARS

Marketing isnt just an art. Its also a science. And in this book,

Curt Clinkinbeard gives us a tour of the laboratory. By demystifying

marketing, hes provided a huge service to free agents who will find

his systematic guide timely, practical, and wise.

Daniel Pink, Author, Free Agent Nation &

A Whole New Mind

The principles you present are not fads. They are the keys that

everyone needs to understand how to succeed in business. To me,

Grandpa Kenny and Grandson Curt show that you dont need a

Harvard MBA or a lot of money to run a successful business. They

show how ordinary people can achieve extraordinary results.

Marcia Stevens, Ph.D. Regional Director, Wichita State

University Small Business Development Center

CUSTOMER PILLARS is exactly what is needed in todays global

marketplace. Curt shows you to develop your business in a simple,

easy to follow format.

Suzanne Mulvehill, MBA; Author, Employee to Entrepreneur;Host, The Entrepreneur Hour Radio Show

What makes CUSTOMER PILLARS such a valuable resource and

joy for anyone in business, is Curts engaging and compelling writing

style. Each chapter communicates warmth, sincerity, and clarity, in

addition to being a comprehensive resource reflecting his professional

expertise and wisdom.

Elisabeth Gortschacher, Founder and Director of E.E.G.

Coaching Pty Ltd and Legacy Creators Worldwide

CUSTOMER PILLARS shines a bright light on the logic path and

gives a specific system for business success. No question, a very large

number of companies can benefit from that illumination.

Frank Hoffman, President, Hall,

Decker & McKibben Advertising


4/139

CUSTOMER PILLARS is well thought out and will benefit readers

in building their business. We are really impressed with the content

really hands-on, practical stuff that should be priceless to businesses.

You will touch many people.Winston and Barb Conner, Professional Business Coaches,

Coaching Dynamics

The Clinkinbeards small grocery store is very different from an

Internet company of today, but the nine pillars continue to apply. We

have all witnessed numerous failures of new economy companies

who believed these principles no longer pertained to them.CUSTOMER

PILLARS provides a perfect way to describe the approach business

owners should take to grow their businesses.

Kevin Groenhagen, Publisher,

Kaw Valley Small Business Monthly

CUSTOMER PILLARS is a valuable collection of quick real life lessons

for either the experienced executive or budding entrepreneur. Curt has

taken a lifetime of learning in the wonderful world entrepreneurship

and put it into one of the most entertaining, educational, and personally

profitable books I have ever seen.

Douglas S. Kinsinger, CCE,

Greater Topeka Chamber of Commerce, President / CEO

Gusto in marketing! This is what Curt Clinkinbeard can help your

small business achieve. He is especially gifted at helping clarify and

define the processes to implement to grow a business.

Dr. Les Streit, Washburn University Small Business

Development Center, Regional Director

The case studies and Curts personal reflections on his grandfathers

business gives you the tools and ideas you need to be successful. Ihave reread several of the chapters and each time garner more insight

into how to CUSTOMER PILLARS my business.

Kathy Domnanish, President, Simply Wireless


5/139

DEDICATION

This book is dedicated to Kenny and Jean Clinkinbeardgrandparents

who welcomed their grandson into their small business and showed

him more than they would have ever imagined. CUSTOMER PILLARS

is written for every small business person who operates their business

with the same heart and compassion as the Nortonville IGA. Your

spirit inspires me!


6/139


7/139

ACKNOWLEDGEMENTS

Writing a book requires support from many people. I am deeply

grateful to Mike & Pat Snell, Gerry Sindell, Wally Kearns, Maggie

Bornholdt, Ed Carpenter, Tom Schwartz, Mark Penn, Todd Manning,

Tony Estes, Keith Hertling, James Hill, Mark Griffith, Joyce Claterbos,

Cheryl Siewald, Chris Deman, Terry Tyler, Bob Featherston, Carl Kurt,

John Ross, Derek Osborn, as well as my fantastically supportive family

(Clinkinbeards, Halls, Fredericksons, Sloops, and Hasketts), my

wonderful colleagues in the Kansas SBDC network, every enthusiastic

client I have ever had the pleasure to work with, and everyone who

participated on the CUSTOMER PILLARS review team.

Mostly, I want to thank my wonderful wife Summer, who has

patiently and unquestioningly supported my pursuit of this project.


8/139


9/139

TABLE OF CONTENTS

Introduction Introducing the CUSTOMER PILLARS 1

Pillar One Focus on Growth Customers 20

Pillar Two Maximize Value Incrementally 45

Pillar Three Refine to Perfect Pricing 64

Pillar Four Form Productive Linking Relationships 91

Pillar Five Sharpen Your Competitive Edge 123

Pillar Six Connect Powerfully with Customers 140

Pillar Seven Manage Expectations Brilliantly 179

Pillar Eight Learn from the Market 216

Pillar Nine Practice Coordinated Growth Planning 244


10/139


11/139

AN OPEN LETTER TO READERS

Thank you for reading CUSTOMER PILLARS!

I wish you much success in learning and taking the principles

found within and putting them into action in your business. They will

help you evolve! Look for ways the material impacts your company,

not just at the surface level, but at a deeper level as well. Avoid the

temptation to say Im already doing that, or That doesnt apply to

me, but rather look for ways to tap into the very powerful potential of

the principles and improve your approach in a continuous manner.

Getting really good at what is found in this book (at those deeper

levels) has many handsome rewards. To the extent your business will

make your dreams come true, it will do so within the context of these

principles. I want your business to reach the goals you have for it.

The basic analogies and the Nortonville IGA anecdotes found

throughout show the back to basics nature of the material. They are

provided as an overlay and introduction to the pillars, the real lessons.

So dont knock yourself out trying to memorize how analogies relate

to expanding your business. Just remember the concepts in this book

are as foundational to growing your business as oxygen, food, and

water are to the human body.Additionally, the book commonly refers to products, services, and

ideaswhat your company is attempting to sell to customers. Often

I will use only the word products, but please know this applies

equally to products, services, or ideas. If there are distinctions between

products, services, or ideas, they will be specifically highlighted.

Also, please realize the concepts are scalable, meaning they apply


12/139

in companies of many different sizes. In the book, examples are often

shared with the concepts in very small companies. The principles

apply in companies of many different sizes. If you are uncomfortable

with any of the numbers provided, simply add or subtract a few zeros.The CUSTOMER PILLARS apply to very small companies, and large

ones as well.

Please feel free to contact the author at [email protected] to

make comments, suggestions, or observationsincluding complaints!

Additionally, the CUSTOMER PILLARS website features many free

downloadable tools relating to the book, as well as other products and

services to assist you with your development efforts.

If you like the book and it helps you, please tell a friend. Even

better, send me a testimonial or write a positive review on any review

websites. Positive reader feedback is extremely helpful! The greatestcompliment you can provide me about the book is to encourage others

to read it.

The book is written to help you and your business reach your

potential. Go do it!

Please visit our website at:

WWW.CUSTOMERPILLARS.COM


13/139

1

INTRODUCTION

INTRODUCING THE CUSTOMER PILLARS

Crash! The jar of pickles hit the grocery store floor glass flew, pickles

scattered, and a smelly green juice ran out onto the aisle. I was only

four working in my grandparents IGA grocery store in Nortonville

Kansas, but I knew breaking something in a store was bad and that the

elderly lady who had done it was in big trouble. And so did she. She

panicked, mumbled apologies, and started to pay my grandmother

right in the middle of the aisle.

With a little laugh and a reassuring smile, Grandma patted the

older woman on the hand and said, Dont worry. Theres no need to

pay. Gosh, accidents happen. Its no big deal.

Oh thank you! the older woman smiledand relaxed. She felt

appreciated. Grandma started to sweep up the mess, and the woman

thanked her again for being so kind.

The pickles incident and others like it were my first introduction

to the ideas that became the CUSTOMER PILLARS system. Just as

a person needs sleep, nutrition, and friendships, the only way to

develop a lasting and successful business is to form, preserve, and

develop excellent customer relationships. Growing your company

the goal of this book and its systematic rulesdepends on theserelationships.

I did not create the pillars the book discusses. I observed and

recorded them; they occur naturally and govern the success of any

business. They are like the laws of gravity, evaporation, or oxygen.

If you use their power to your advantage, your revenues, profits,

and overall success will multiply.


14/139

2 CUSTOMER PILLARS

GROW OR DIE

Vince, the owner of PlaceWorks Interiors, enters my office with a

determined look. We have to find a way to increase this business, hesays. A mentor once told my partner and me that a business is either

growing or shrinking. So, the only option is to expand.

Each year, I speak with hundreds of small business owners &

managers, and whether their company is starting from scratch, riding a

wave of positive momentum, or pulling itself up from a major setback,

their motives are the same. They want their businesses to grow, but

dont know what steps to take. As Vinces partner Samantha puts it:

Were confused. We actually have too many ideas. For instance,

were considering expanding our product offering, but arent sure

which lines to add. Plus, we cant decide whether to increase ouryellow pages ad, use direct mail, or increase our personal selling

approaches. Then theres our debate on pricing and discounting. We

seem to be going in too many directions. What should we do?

Instead of answering those questions directly, lets take a step

back, I begin, and look at the bigger picture. When you answer the

big questions, I find the smaller issues almost solve themselves.

Vincent and Samantha, like many business owners, approach

building their company as a series of individual, random, tactical

issuesquestions, opportunities, and challenges posed on an almostdaily basis. They think these topics are unrelated to other, bigger

matters. Rarely do they consider the interconnected nature of

expansion efforts or approach them strategically or completely.

I discovered the CUSTOMER PILLARS when I noticed myself

asking questions about key strategic issues in response to client

queries about small picture issues. Clients didnt typically have

good answers to the important, big picture questionsthe key things

necessary to properly answer the smaller, tactical questions. It was as

if they were asking me which highway they needed to take, but didnt

know their destination.

So I started to record the questions I was asking these clients

to refocus their concerns away from tactical actions towards an

integrated, strategic approach. Over time, nine key areas emerged and

the CUSTOMER PILLARS began to take shape.

Over the next few hours I will work with Vince and Samantha

and teach them nine naturally occurring fundamentals that form the


15/139

PERSONAL USE ONLY NOT FOR RESALE

Introducing the CUSTOMER PILLARS 3

PILLARS system. Together the pillars form an organized roadmap

that shows how to develop any business, increase its revenues, and

maximize its profits. The system will help you do this as well.

LETS TALK GROWTH

Increasing profitable revenues is an important part of keeping a

company alive and prospering. Have you ever been in a company that

was getting smaller? Not fun. Cost cutting, layoffs, politicking, and

negative self esteem are hallmarks of shrinking firms. In addition to

being necessary for the company, growth is also fun!

So, do you want to double, triple, or quadruple your business?

There are strategies to make almost any business as large as youare willing to increase it. Nearly every business is limited only by

the growth mindset of the people who own, manage, or work in it.

Developing this growth mindset is the purpose of this book. (Note:

the pillars also work if your goals are more conservativeall revenue

growth is impacted by the principles discussed here.)

While there are several ways to expand, this text only discusses

internal, organic growth. It does not go into acquiring other companies,

another expansion strategy. There are other books for that. This one

talks about taking what you have and making it more successful.Lets look at some fun numbers. Assume you want to double or

triple your revenues; here are annual growth rate percentages necessary

to double or triple a business over a certain number of years.

Years To Grow

the Business

Annual Growth Rate

Required to Double Biz

Annual Growth Rate

Required to Triple Biz

1 100% 200%

2 42% 73%

3 26% 44%4 19% 32%

5 15% 25%

6 13% 20%

7 11% 17%

8 9% 15%

9 8% 13%

10 7% 12%


16/139

4 CUSTOMER PILLARS

The CUSTOMER PILLARS are time-tested and govern both the

expansion in your business and the rewards you receive from it. Can

you grow if you already have all the revenues you want? Yes! Just

improve the quality of revenues, increase the margins, and work onlywith people you enjoy and pay their bills on time. The rewards of the

CUSTOMER PILLARS are personal as well as professional.

INTRODUCING THE 9 CUSTOMER PILLARS

All you need to get your business on the CUSTOMER PILLARS path

is to follow these nine basic rules.

THE 9 CUSTOMER PILLARS

Pillar 1 Focus on Growth Customers

Pillar 2 Maximize Value Incrementally

Pillar 3 Refine Toward Perfect Pricing

Pillar 4 Form Productive Linking Relationships

Pillar 5 Sharpen Your Competitive Edge

Pillar 6 Connect Powerfully with Customers

Pillar 7 Manage Expectations Brilliantly

Pillar 8 Learn from the Market

Pillar 9 Practice Coordinated Growth Planning

When you master these pillars, you will know how to successfully

build your company and your career. Understanding the system is

fairly easy, but learning its intricacies, how it applies to you, and how

to best implement it is a bit more involved.


17/139


THE 9 CUSTOMER PILLARSAT WORK

Lets take a quick look at The 9 CUSTOMER PILLARS alive in another

company: Jim Anderson is the managing partner in a law firm,Anderson, Phillips and Conway (APC). And while the focus of his

daily work is providing legal services, he knows the CUSTOMER

PILLARS are critical to developing his business:

I may sign the paychecks, but our clients are the ones who really

provide the money for our expenses and profits. Without them, we

wouldnt be anything.

Pillar 1: Focus on Growth Customers has fueled the progression of

APC over the past few years, both by adding new clients and growing

existing clients. The company focuses on businesses in a regional

area, though it does have several clients who have operations across

the nation. To further define their target clients, the firm has an

emphasis on four primary types of industries, which allows them to

further specialize. They have identified their most desirable growth

targets and have programs to introduce prospective clients to their

services.

Pillar 2: Maximize Value Incrementally means structuring the product

or service around growth clients. APC offers traditional legal servicesto business clients, concentrating on their clients profitability. The

firm constantly reinvents itself and the services it offers, emphasizing

contract, employment, franchise, and intellectual property lawthe

services most requested by their best markets. The company closely

monitors client demand and shifts and changes correspondingly.

Pillar 3: Refine Toward Perfect Pricing describes the companys

approach to charging its clients. The company bills services on an

hourly basis dependent on two things: the level of expertise/experienceof the associate performing the services and a competitive analysis.

The company performs a pricing review every six months and makes

adjustments as necessary.

The firm also has strict billing procedures designed to maximize

revenues and provide the greatest value to clients. The firm attempts

to get the most service to a client for the most reasonable price, even


18/139

6 CUSTOMER PILLARS

if that means assigning multiple lawyers at different rates to handle

various tasks.

Pillar 4: Form Productive Linking Relationships. The firm has severalcross-referring relationships with other providers of business

services including accountants, banks, and insurance professionals.

These important intermediaries help link clients to the business and

are essential to the firms evolution.

In most cases, the firm distributes its services directly to its clients,

though it occasionally handles more sophisticated services for smaller

firms. APC bills the smaller firm at a slightly discounted rate (for

bringing them the business) and the smaller firm marks the services

up to their clients. APC views these linking partners as an untapped

opportunity.

Pillar 5: Sharpen Your Competitive Edge. APC conducts business in a

very competitive environment, and as a successful firm, is constantly

fending off other firms attempting to lure their clients away.

APC has a four-pronged approach to being their clients preferred

choice:

First, they have a more client friendly billing procedure than

other law firms. The firm takes extra care explaining this policy to its

clients.Second, their firm puts a strong emphasis on developing personal

relationships with their clients. Their motto is to treat clients like

theyre our friends. Associates are encouraged to take clients to

lunches, dinners, golf outings, and social occasions.

Third, the firm invests heavily in continuing education and

certifications, well above industry requirements. To highlight this,

the firm publishes a quarterly newsletter for clients featuring new

certifications obtained and expertise learned.

Fourth, follow up is completed to ensure client satisfaction. Thefirm has a formal policy which checks in with clients after work is

completed to make sure theyre happy. This increased dialog sends a

powerful message to clients that APC is a cut above the rest.

Pillar 6: Connect Powerfully with Customers looks at strategies

used to communicate with clients. The business uses a multitude of


19/139


methods to share the firms vision with current clients as well as with

companies who may become clients, such as client newsletters (they

have several which focus specifically on different types of clients),

follow up surveys, and the explanation of billing procedures.Other communication strategies include sponsorship of local golf

events, yellow pages advertising, networking through the Chamber of

Commerce, speaking to business clubs on legal matters, press releases,

and sales training to all employees.

Pillar 7: Manage Expectations Brilliantly.APC takes steps to guarantee

client satisfaction is foremost in all its associates minds, all day, every

day.

The firms mission statement strongly emphasizes value and

service to the client, with partners demonstrating their commitment

by actively reviewing client feedback forms and by managing the

response to client issues, both internally and externally. The issue

of client satisfaction has very high visibility within the firm and is

continually measured with several different systems.

For example, Jim recently got on an airplane to visit a client who

had a small misunderstanding with one of the associates. While the

issue could have been dealt with over the telephone, Jim wanted his

client to feel valued and decided to go to the additional effort of an in-

person meeting. The client was so impressed she asked Jim to handlethe work a subsidiary company had previously planned on awarding

to a local firm. The resulting additional six figures in billings from

the client provided a huge return on investment for Jims trip.

Pillar 8: Learn from the Market. Jim learned early in business that

expansion activities dont always work out as planned. So the firm

tests new concepts on a small scale and measures client reactions.

When clients respond favorably to a new initiative, the company rolls

out the program while continuing to monitor its progress.

Programs are finalized only through trial and error. The ones that

work are repeated and increased; those that fail are eliminated or

revised. This testing and research is an ongoing process of refinement.

Pillar 9: Practice Coordinated Growth Planning closes the loop

back to the business plan and ensures everyday actions support


20/139


21/139

PERSONALU

SEONLY

NOTFORRE

SALE


how much the business has evolved since then. Today was the

culmination: selling the business and reaping the rewards of all the

hard work.

Thinking back, Frank recalls times when things werent sogreat. Like many entrepreneurs, he started Hamilton Commercial

Services without any significant business background. One day he

was an employee in another firm; the next he was a business owner.

The transition wasnt an easy one, particularly during the first six

years.

Then something happened.

Frank remembers the situation vividly. Sales had been down for

three straight quarters after the loss of a major client and cash flow was

getting tight. He had tried bringing in expensive consultants and high

dollar management employees to provide direction, but the resultswere usually fleeting.

It was like I snapped and everything came into place, Frank

recalled. For years I did everything to say that sales and marketing

was not my thing. Then I realized developing profitable customers

was the business. I was compromising myself and my company by

denying full responsibility for our success.

He remembers desperately wanting to flourish as an entrepreneur.

Profits needed to rise and he had already cut costs down to the bone.

The only way to reach his profit goal was to increase revenues. Frankknew they needed to sell more to a larger number of customers. And

he knew this meant he personally needed to develop better business

management and marketing skills. It was this moment of truth when

Frank went from being an average business owner to being on a

CUSTOMER PILLARS path to success.

Today, many years later, was the grand finale of that moment.

There are approximately 25 million businesses in the United States

today and between 500,000 and one million new companies start each

year. The success and longevity of each one of these companies will be

determined by the CUSTOMER PILLARS.

Building good revenues must become part of any successful

companys essential corepart of who they are as a company. This

makes it especially difficult to pass on the responsibility for success

with customers to others. Many entrepreneurs, in response to their

perceived lack of sales and marketing skills, seek answers outside

themselves. They bring in consultants, buy tape programs, and hire


22/139

10 CUSTOMER PILLARS

save the day employees. Too often, however, theyre disappointed

in the results.

CUSTOMER PILLARS recognizes that the unique, driving,

revenue force in a company comes from within; it is part of thefundamental leadership required to make a business successful.

Outsiders just cant develop and sustain your true essence for you.

This may cause some to fret. And yes, it would be easier to just

hire someone to do it, but taking ownership for this important part

of your business is within your grasp. Giving you this capability is

why I wrote this book!

IT ISNT A YES OR NO QUESTION

Those pillars are interesting, Samantha says with a devils advocate

tone in her voice, but were already doing many of the things you

mentioned. Im not really sure these nine pillars are going to be that

helpful in our expansion efforts.

She raises an interesting question regarding CUSTOMER PILLARS.

Sometimes when people are initially introduced to the principles, they

recognize some of the activities as things they are already doing in

their business. Thats great! It is rewarding to hear people excited they

are already doing some things very well. But succeeding isnt an allor nothing proposition. Think of CUSTOMER PILLARS success as

ranging from 1 to 100.

In fact, each of the nine

pillars measures its success

on a continuum, so its really

nine different continuums

from 1 to 100. Clearly,

strength in one of the nine

pillars will synergistically

improve the other pillars,

as they are very connected.

However, no company is

achieving perfection in

each of the nine pillars

and every company needs

continued improvement, because things are changing. Always.


23/139


Shifts in the markets, the economy, competitors, and in your customer

base mean your success in CUSTOMER PILLARS is an evolving and

flowing activity. Its a moving target! You can be on top of the world today

and in the gutter tomorrow. Similarly, you can be down and out, shift yourapproach, and become extremely successful. It happens all the time!

Because of this, the Japanese principle of kaizen, which encourages

continuous and never ending improvement, applies to CUSTOMER

PILLARS. A business should always be working on progress in the

areas discussed in these principles and never consider their efforts

finished. Its bigger than that.

DO WE OWN THE MARKET ON GROWTH?

Some may say there are more ways to grow a business than developing

customer relationships or increasing and improving customer

revenues. For example, some businesses grow by creating innovative

technologies, others find the best employees, others raise capital.

But all of these are valuable only in relation to their impact on the

CUSTOMER PILLARS.

New technologies only create value if they provide a CUSTOMER

PILLARS opportunity. Does the technology itself generate prospects for

increased profits or enhance the companys ability to reach and servecustomers? Essentially, if technology does not improve the companys

approach to customers, either directly or indirectly, its value is limited.

Similarly, strong employees can be an excellent growth strategy if they

improve the companys revenue and profit streams and relationships

with customers. When strong employees complement the CUSTOM-

ER PILLARS approach, its a great strategy. Finally, financing is often

necessary to capitalize on expansion opportunities. Solid financial re-

serves produce great value when those dollars are used to improve the

profitability, strength, and development of customer relationships.

Take the case of Steve Wilson and his IT consulting firm. Through

his career as a well paid employee, Steve had been storing acorns to

start his own business. He estimated he would need $30,000 for startup

funds. But because he had done a great job saving, he had $50,000 to

invest. Steve was extremely well capitalized for his startup.

Upon starting his company, Steve rented a beautiful office, hired

an administrative assistant, and spent aggressively on advertising.


24/139

12 CUSTOMER PILLARS

And though Steve was regarded as an excellent technical consultant,

he was a little uneasy in one-to-one selling situations. His approach

was to advertise, let his expertise speak for itself, and let the business

come to him.Unfortunately, eight months into the project, Steves revenues

were about 25% of what he had anticipated. For whatever reason,

he was not connecting with the market. As he was closing down

his business and polishing his resume, he exclaimed, Im shocked.

They say most businesses fail because theyre undercapitalized.

I was actually overcapitalized and one of the best trained

professionals in my area. It just doesnt make any sense that this

did not work.

Contrast this to Sheryl Hoffman. She also wanted to start an IT

consulting firm. Like Steve, she hoped for $30,000 in startup funds.But she only had $10,000, so she decided to move forward, but to start

very small.

Sheryl kept her corporate job to pay the bills, but took on consulting

work in the evening and on weekends. This made life a little frantic;

however, she was able to start her business. After three months, Sheryl

was bringing on more work than she could complete in her limited

time.

To keep accepting consulting work, which was much more

profitable than her day job, she decided to work a part-time job untilrevenues allowed her to put her full-time effort into the consulting

firm. This took another nine months.

Today, Sheryl has a very successful consulting firm which employs

ten other people. She earns about four times as much as her last full

time salary. She is a great success! In starting her business, financing

was a weakness, but her mastery of the CUSTOMER PILLARS was a

strength.

Dont get me wronggiven the choice of starting out with sufficient

capital or not, I would definitely choose being fully capitalized.

Ultimately though, the success of the business will not be based on

its financing. It will be based on how quickly a company can connect

with the market and generate real profits which can be used to finance

its ongoing operation and additional growth. Being well capitalized

will never compensate for being weak in the areas discussed in the

CUSTOMER PILLARS.


25/139


IDEAS ARE EVERYWHERE

One of the great things about the expansion approach described in

this book is that it applies universally to companies across industries.Because of this, much can be learned studying the growth techniques

used by others.

Sharon Salisbury owns the Downwindin Ranch House Bed &

Breakfast, a popular getaway spot for busy professionals. The business

caters to a wide variety of peoplemany are executive couples in the

city who are looking for a quick and relaxing weekend escape in the

scenic country.

One day, Sharon was booking an airline flight to Salt Lake City for

a family function unrelated to her business. Though she is attracted

to some of the special offers by other airlines, she is a member ofa courtesy club on one of the major airlines and gets a great deal

on bonus miles. So she sticks with her standard airline. As she was

placing the order for her flight, she thought to herself, Wouldnt it

be great to have a frequent flyer program for the bed and breakfast

that kept people coming back time and time again?

She started to brainstorm ideas. Since many of her customers

come to the B&B from the city for a brief getaway and the focus is

on a refreshing, stress-reducing weekend, the loyalty idea had great

possibilities. Some of her clients are frequent repeaters and some areonly one timers.

Sharon thought about it. People need these getaways on a

regular basis to keep things in balance, and her repeat customers

were much more profitable due to the decreased incremental selling

cost per repeat customer. She wanted to be sure they came back to

her B&B instead of trying another one or something else entirely.

Marketers would call Sharons idea a continuity-based, retention

strategy.

She considered the four seasons, and her instincts told her people

would need this type of refresher every third month or so. So she

opted for a campaign based around the seasons and thought about

special activities to combine with each seasonal visit. Her goal was

to keep the customers experience fresh and unique on each mini-

vacation.

Thinking back to the airlines courtesy club she realized people

like to feel special and that giving some exclusivity and special


26/139


27/139


The % change in revenues is calculated the same way, but with

revenues. The periods of comparison can be monthly, quarterly, or

annually.

When you monitor the growth efficiency ratio, you are tracking thequality of the growth. Basically the ratio looks at whether an increase in

sales revenue results in a corresponding (or greater) increase in profits.

In this ratio, if profits and revenues increase by the same percentage,

the ratio is 1.

Theoretically, any increase in revenue should be exceeded by

the increase in profitability. For instance, a 10% increase in revenues

should result in a profit increase of more than 10%. If revenues increase

by 10% and profits increase by 15%, the ratio is 1.5. But if revenues

increase by 10% profits increase by 5%, the ratio is 0.5. Obviously, the

bigger the ratio, the better.While its hard to argue with any increase in profits, if the ratio is

less than one, you should still try to understand why the percentage

change in profits was smaller than the percentage change in revenues.

You have to apply this ratio with an understanding of what is going on

inside the company and any extenuating circumstances. But, certainly,

a goal should be to generate additional revenues which are efficient at

producing even larger increases in profits.

To make this mathematical concept more tangible, lets look at

Luxury Pool Supplys last few years of revenues and profits.

Year 2001 2002 2003 2004

Revenues $475,473 $518,266 $575,275 $655,813

% Change inRevenues 9% 11% 14%

Profits $33,283 $36,279 $41,720 $45,058

% Change inProfits 9% 15% 8%

Growth EfficiencyRatio 1.0 1.4 0.6


28/139

16 CUSTOMER PILLARS

In 2002, revenues and profits both increased nine percent,

yielding a growth efficiency ratio of one. In 2003, revenues increased

11 percent over 2002, but profits increased 15%. This gives us the

more favorable ratio of 1.4. This means the new revenues weremore efficient in generating profits. This is what you want. In 2004,

revenues increased by 14%; however, profits increased only 8%,

yielding an efficiency ratio of 0.6. While this is still progress, 2004s

growth was not as profitable as the other years.

If you have a year like this, attempt to figure out why. There can

be good reasons for a ratio smaller than one: if, for example, dollars

invested in one period reduce the periods profitability, but position

the company for future profitability. Tracking the quality of your

companys growth will help you understand the reasons for it.

You can also compare your revenue growth to industrygrowth. Most industries have market research on overall industry

growth. Try an industry market research report or your industry

association to find this. Chapter Eight provides more details on

these resources.

The second ratio, called the Industry Growth Ratio, is calculated

as follows:

Industry Growth Ratio = Companys Annual Growth %

Industry Growth %

For example, if the industry grew at 6% and you grew at 9% last

year, you have a ratio of 1.5. Again, the higher the ratio, the better. A

ratio of 1 means you and the industry grew at exactly the same rate

in other words, you kept up with the growth within the industry and

maintained the exact same market share. If your ratio was above 1,

you grew faster than the industry and grew your share of the market.

If your ratio was below 1, you grew more slowly than the industry and

lost market share.Tracking these ratios helps both to quantify the quality of the growth

and increase your understanding of it, so you can set appropriate

expansion goals.

These ratios are valuable but dont always work perfectly in every

situation. Negative numbers distort the calculations, so you may

need to do some additional interpretation of the numbers if any of


29/139


the numbers you are using show negative growth. When growth is

present, though, these ratios really help you understand its quality.

THE KEYS ARE IN THE IGNITION

So are you serious about building your business? Many people pay

lip service to business growth; not so many actually do anything to

achieve it. Youre holding an important system for evolution, but you

need to look below the surface and really think about it to understand

how it impacts you. Read this book actively: its more than theories

and ideas for passive consumption. The real benefit comes from

seeing how the ideas and suggestions relate to your business and

taking actions based on your insights.

I believe in the growth potential of your business. This book

describes the systematic approach I would take if I were working

directly with you and your company. It shows you how to use the

same thought processes I would use, as if I was advising you about

your business and what you should do to increase it. View the book as

your personal CUSTOMER PILLARS coach!

Imagine an open field with many visible stones, many covering

gold nuggets. The books goal is to point out the stones, so you will be

more likely to look in the right places, and turn over the right ones tofind the best opportunities for your business. Read, absorb, then act.


30/139

18 CUSTOMER PILLARS

QUICK TIPS FROM THE PILLARS

The end of each chapter gives specific tips which can serve as a to do

list from each chapter and help you act on the chapters information.

For example, after reading this chapter, I suggest that you:

Define specific expansion targetsunderstand why you

have selected these goals and what accomplishing themwill mean to you and your business

Study the nine pillars of growtheven memorize them

and see how each principle impacts your business

Take full responsibility for the development of your

businessno consultant, employee, vendor, customer, or

competitor will ever drive or determine your growth; you

do

Write down your ideasreading this book and thinking

about expansion should generate more ideas than you can

address in the immediate term; have a method to collect

and record your brainstorms

Use the growth efficiency ratio and the industry growth

ratio to track and analyze your progression

Commit to excellent execution of the basics and continuous

improvementgrowth doesnt have to be sophisticated to

be effective; fully master the basic fundamentals first

Teach your employees the tenets found in CUSTOMER

PILLARSif they understand and use the pillars, you will

be better positioned to grow


31/139


Study other industries and uncover expansion opportu-

nities in yoursideas are everywhere so keep your eyes

open

Develop a growth mindsetbusiness development re-

quires a serious, focused concentration! A significant ex-

pansion effort requires stepping back, evaluating the busi-

ness, and taking a broad-based strategic approach


32/139


33/139

20

PILLAR ONE

FOCUS ON GROWTH CUSTOMERS

Kenny, how are your steaks today?

Theyre as tender as my heart, my

grandfather said.

And are your chickens fresh?

Well yesI even had to slap one on

the hand about ten minutes ago!

The shoppers buying their groceries

laughed, my grandfather chuckled,

and I, the little boy watching everyone

at the meat counter, giggled too.

My grandfathers jolly demeanor

made almost anyone smile. He looked

straight out of the 1950sand he went

out of his way to greet customers, answer their

questions, and even flashed his dentures at children to make them

laugh. Customers adored him.

There was not an endless supply of new customers in Nortonville.

My grandparents knew that they had to keep the customers they

had, and that to survive and grow, they needed to get as much oftheir customers business as possible. Their approach was to make

customers friends and their young grandson noticed.


34/139


Pillar One: Focus on Growth Customers 21

PILLAR 1: FOCUS ON GROWTH CUSTOMERS

To profitably increase revenues, the focus simply must be on the

customers which contribute to that growth. (There just isnt anyother way to do it!) To evolve, the mantra must be the customer, the

customer, the customer.

The dollars leading to increased financial performance in your

company were once in the wallets, purses, and bank accounts of your

customers. Increasing revenues means convincing clients that giving

that money to your business versus keeping it or giving it to someone

else will serve them best. The decision, nonetheless, is the customers

and they vote with their dollars.

Customers are the gasoline that fuels the engine, the blood pumping

through the heart, and the foundations that begin and perpetuate thegrowth of your company. Brilliant products, endless financing, and

incredible technological savvy are all completely worthless without

solid customer relationships.

So the question Who are we going to sell to? is crucial. Answer

this question with specifics and never stop trying to discover more.

The company that best understands their customers and prospective

customers is in the best position to be the industry leader. So define,

study, and learn to gain greater knowledge of and intimacy with your

customers. You are probably already doing some of this; this chaptershows you how to take what youre doing to a deeper level.

If you want to double revenues, your choices are to:

1. Double the number of customers,

2. Double the amount sold to each customer,

3. Double the price of every item sold, or

4. Some combination of the above

Usually, growth is influenced by all of these strategies. By definition,

a growth customer is one who contributes to the expansion objectives

of the company, specifically this includes:

1. Base/existing customers


35/139

22 CUSTOMER PILLARS

2. New customers

3. Customers who, though their own progress, become larger

customers of the company

4. Highly profitable customers

5. Influential customers who will bring other customers with

them

THERE IS A DUMB ANSWER

People often say theres no such thing as a stupid question. But there is

a stupid answer to the first crucial expansion question, Who are you

going to sell to? If you say, Everyone, you are making a common

mistake. In fact, the surest clue you dont have one, is to say that

everyone will want to buy your product.

No companynot McDonalds, not Microsoft, not Disney

sells to everyone. Narrowing the scope, defining the customer, and

developing intelligent strategies which cater to your customers

specific, individual needs cant happen if your target is everyone.

Thus, customer segmentationidentifying and learning about groups

of customersis a vital part of the expansion process.

DIFFERENT STROKES FOR DIFFERENT FOLKS

Companies succeed by knowing their specific customer base and

its motives, then by designing products or services to meet those

needs. Do this well and you will maximize the longevity, growth, and

profitability of customer relationships.

Studying the entire customer base and breaking it down into

segments helps in several ways. When you are more specific about

customer groups, you have more information about individual

customers. You also reduce the number of potential customers in

each group, so you understand the targeted customers better and can

increase the effectiveness of how you approach them. This is how you

advance.


36/139


Customer segmentation is different if you sell to businesses (B2B)

than if you sell to consumers (B2C). Some common ways to segment

both groups include:

B2B Segmentation B2C Segmentation

Industry (SIC/NAICS code)

Geography/Location

SizeRevenue levels

SizeEmployee count

Length of time in business

Business function or department

Distribution Strategies Management Practices

Demographics

Age

Gender

Race/Ethnicity

Income

Home Ownership

Psychographics Personality

Attitudes

Lifestyle

Social Tendencies

Fashion/Music Tastes

Shopping Preferences

Hobbies

Geography

Stanley Hernandez owns a medical distribution company and sells

to approximately 12,000 different customers per year, all with differing

desires, motivations, and needs.

To deal with this, Stanley segments his customers and

prospective customers by whether they are hospital or non-hospital

customers: a small medical clinic with fewer than twenty employees

and a large hospital require very different approaches. He then

segments the two groups by specialty: physical therapy, oncology,gynecology, dental, and surgical; all use different supplies and have

different needs.

Stanley also segments customers by distance from his

distribution center. Customers within a two hour drive are offered

different delivery options than those further away. Both types of

customers can be served, but the company takes a consciously


37/139

24 CUSTOMER PILLARS

different approach.

Customer segmentation allows Stanley to look at customers and

prospective customers in a more detailed way to consider their specific,

individual needs. This is crucial to Stanleys strategy and success.

THREE CUSTOMERS EVERY COMPANY SELLS TO

An interesting way to segment customers is to divide them into (1)

current customers, (2) previous customers and (3) new customers.

Some think growth is primarily about attracting new customers. And

while a steady stream of new customers is a great goal, it is only one

way to expand.

Activities designed to keep and expand existing customers are

called retention strategies and are vital to development. The more you

study revenue growth, the more you realize how costly it is to acquire

new customers. Retention strategies maximize this investment by

keeping those customers active and developing long-lasting streams

of revenues.

Good retention efforts focus on the retention ratehow many

customers that bought last year, also bought this year? For example,

if you sold to 1000 customers last year, added 200 new customers this

year, and sold to a total of 1050, you would have an 85% retentionrate:

1050 customers this year (year 2)

- 200 new customers (new year 2)

= 850 customers that bought this year and last year

1000 customers from last year (year 1)

85% of customers from year 1 also bought in year 2

This also means that 150 customers were lost. So for every foursteps forward (the 200 gained), you took three steps back (the 150 lost).

If you increase the retention rate to 95%, you would have sold to 100

more customers:

1000 customers last year (year 1)

X 95% retention rate


38/139


950 retained customers

+ 200 new customers

1150 total customers (year 2)

If the average customer revenue was $500 per year, the difference

in the two retention scenarios would be $50,000, over nine percent of

total revenues. Retention rate is important.

It may help to imagine a river, with new customers flowing in

and lost customers flowing out. Retention strategies act like a dam.

Customer retention builds a lake of your customer base and revenues.

To take this further, it makes no difference how fast the river flows into

the lake if the outflow (lost customers) is equal to or greater than the

inflow; if theyre equal, the lake never grows. However, if the dam is

strong and the water stays in the lake, it will grow, no matter how slow

the inflow is.

So, I often ask clients, If you had to double your sales by selling

only to your current customers, what would you do?

The lifetime value of the customer (LVC) is an important related

concept. It quantifies the amount of revenue generated from a

customer over a lifetime. Consider the example of a can of soda pop.

When the consumer picks one brand or the other, its a decision with

an immediate 50 cent impact. But the choice of soda goes much further

that that.If that person drinks two cans of pop per day, that fifty cent decision

actually becomes a dollar decision per day. Thus, on an annual basis,

the decision is actually $365. If the person drinks soda for over fifty

years, its an $18,000 issue. Retaining customers and serving them over

their lifetimes can make you rich. As the owner of a very successful

coin operated laundry business proclaimed,

You make a million dollars a quarter at a time!

We see this potential with Bud Williams, who had owned a local

automotive repair shop for about five years when we were first

introduced.

Im not sure what I need to do, he began. Ive been in

business for a while now and really seem to struggle. When I

worked for someone else, I made great money and was a really

valuable part of that business. But with my own company, I really

fight to keep afloat. We are just over our breakeven point and I


39/139

26 CUSTOMER PILLARS

make less money and work much harder now than I ever did when

I was an employee.

The answer was to evolve. So I started the process of helping Bud

improve his companys results. He was working hard and was takingrisks, so he deserved the rewards for the effort and investments made

in his company.

Lets start by looking at your existing customers, I suggested.

How many customers did you sell to last year?

After some research, Bud told me he had sold to 582 customers

over the entire year. I then asked him what his revenues were for the

same time period. After a quick review of his profit and loss statement,

he told me his sales were $196,116.

After doing some quick division with my calculator, I said, So the

average revenue per customer is about $337. Does that sound aboutright? With the puzzled look Bud was giving me, I knew he was

thinking about the number and he finally agreed it sounded about

right. (Math = 196,116 582 = 337)

Let me ask this: how much money does the average American

spend on automotive maintenance and repairs in a year?

The association tells us about $2,000 per year, Bud replied.

Bud, then let me give you two important numbers for your

business, I told him. 17% and $100,000.

What do those numbers mean? Bud asked.First, the number $100,000 is an estimate of the Lifetime Value

of a Customer for your business. This simply means how much the

customer of your product or service will purchase during their lifetime.

I assumed the average person drives for about 50 years. Its probably

give or take a few years, but thats close. Take that multiplied by your

$2,000 number from the trade association and you get $100,000.

(Math = 2,000 x 50 = $100,000)

Wow, Bud exclaimed. What youre saying is every customer we

serve is potentially worth $100,000. That sheds new light on a $30 oil

change.

Yes, it certainly does. And if you include that you sold to 582

customers last year, this means the entire lifetime value of all the

customers is over $58 million dollars!

My word, Bud uttered. I knew I had his attention. So what does

17% mean?

To use some more marketing jargon, Bud, 17% is your current


40/139


share of customer. Remember we calculated your average sale per

customer was $337 and the average customer spends about $2000 per

year on products and services like yours. Simply, the percentage is just

shy of 17%. (Math = 337/2,000 = 17%)So we are only capturing 17% of the potential from our

customers?

Youre learning quickly, Bud. Now, based on what you sell, could

you increase that share of customer percentage?

I know I could, he replied.

We then calculated the ramifications of increasing the share of

customer percentage in Buds business:

% Share ofCustomer

AverageCustomer $

Revenue with 582Customers

% Change inRevenues

16.85% 337 $196,134 0

18% 360 $209,520 7%

20% 400 $232,800 19%

22% 440 $256,080 31%

25% 500 $291,000 48%

33% 660 $384,120 96%

Buds eyes grew wider we studied the numbers.

So if I increase share of customer from the current 16.85% to just

20%, I can increase my revenues by 19%. That is incredible.

Bud can also double his business if he increases his average

annual customer size to just over $670and he can do this byselling only to the same number of customers as he did last year.

In most businesses, a significant amount of revenue can be added

by increasing the share of customer (and thus, the average each

customer spends with you) and by knowing the lifetime value of

the customer.


41/139

28 CUSTOMER PILLARS

Specific actions around growth-based, customer retention

strategies are to:

look for ways to invest in the relationship and become a

more important part of the customers life (or business)

increase the trust between the company and the

customer

expand the product line to provide more products or

services to customers

use cross-selling (selling other parts of your line to the

same customer) and up-selling (selling more per order) toincrease the average customer size

enter into marketing partnerships with other firms

to bring more products or services to your existing

customers

develop ways to foster customer loyalty

build up barriers to prevent customers from switching to

competitors

improve the communications between your company

and its customer base

Studying existing customers also allows you to identify

trends, laws, challenges, or any pertinent timing issues that create

opportunities to better serve and retain them. This helps capitalize

on these important customer relationships.

Keeping customers for the long-term has huge financialramifications. Implementing retention strategies to keep and build

your existing customers makes perfect sense. One of the next steps is

to carefully study your current customers and put strategies in place to

maintain communication ties.


42/139

PERSONALU

SEONLY

NOTFORRE

SALE


COMMUNICATING WITH EXISTING CUSTOMERS

Keeping and growing existing customers is a powerful strategy,

so what does a company do to make this happen? In addition toproviding great products and hoping customers come back, I suggest

a more proactive approach. Usually, this means designing specific

communication approaches with focused objectives aimed at existing

customers.

We used to direct all of our advertising to getting new customers,

Stanley Hernandez said of his medical distribution company. Then

we realized that most of our business comes from repeat customers. So

we sat down and designed an organized approach to staying in touch

with them. We wanted to make sure that when a customer comes

into our business, they stay with us for many years to comeand wewerent going to leave this to chance.

Their communications approach included:

follow up telephone calls after orders were delivered

a monthly sales flyer mailing

periodic emails with special discounts of the day

a quarterly catalog mailing

a follow up telephone call at the anticipated reorder time

Finding great customers is a huge investment. Evolving means

both maintaining and cultivating your existing customer base.

A significant part of making this work is helping your customers

succeed. Growing companies use strategies which are best for both

the company and the customer: their strategies make customers win.

People talk about win-win all the time, but act on it less frequently.

I was once in a clients planning meeting when I sensed thatcertain members of the team did not want their customers to become

too successful. They thought that if their customers grew too much,

they wouldnt need their services.

Do you think the customers sensed this? I sure did, and my guess

is their customers did as well. I suggested that the company find ways

to add value not only until, but especially when, their customers grew.


43/139


30 CUSTOMER PILLARS

This brought the companys goals into alignment with their customers

goals and created several outstanding new revenue opportunities for

the company.

Similarly, growing companies appreciate their customers andshow it, not just by sending holiday fruit baskets or cards, but all year,

every year. Too often companies find their customers a hassle or take

them for granted. A growth mindset deeply appreciates the customer

and keeps this in the forefront of both managements and employees

minds. When you truly appreciate anything in life, it shows. So does

the opposite.

RECAP: RETENTION ACTIVITIES

Understand important factors to keep customers

Calculate the Lifetime Value of Customer

Increase the Share of Customer

Develop a good customer database

Implement communication strategies specifically

based on customer retention

Develop a win / win mindset with customersand deeply appreciate them

Develop and implement a focused approach to

retain and grow current customers

WE WANT YOU BACK

Stanley Hernandez was deep in thought during a strategic planningsession for HernMedCo. Every year, he takes his top four managers,

himself, and an outside consultant to a remote ski resort in New

England. There they get away from telephones, employees, and any

other distractions to refine their business plan.

What can we do to better penetrate the dental market? Stanley

asked his team.


44/139


45/139

32 CUSTOMER PILLARS

80 were still in practice, remembered the company, and did

not have a specific reason for not purchasing recently

If 80% of the previous customers are prospects (based on

the survey), the company would have 6,000 prospective

customers. (Math = 7500 x 80%)

If the company was able to get 25% of these prospective

previous customers back, theyd have 1500 reactivated

customers. (Math = 6,000 x 25%)

If the company could retain last years 3,500 customers

and reactivate 1,500, they would have 5,000 current

customers.

If the reactivated customers all purchased at the averagecustomer level ($478), then the reactivated customers

represented $717,000 in incremental revenues. (Math =

1,500 x 478)

If captured, this would represent a 43% increase in

revenues. (Math = 717,000 1,673,000)

Reactivating previous customers is typically much easier (and less

costly) than getting new customers. As the managers at HernMedCofound out, most customers dont stop buying because the company

has failed to service the account. (If you are losing business based on

poor performance, you need to proceed immediately to pillar seven!)

They just get caught up in their own lives and forget.

These customers are great prospects, because they have already

proven (1) they are interested in buying the things you sell, (2) they

are willing to purchase from your company, and (3) they probably

remember you. If you have not maintained a good customer database,

they might be more difficult to identify. But you can find them (review

old checks and credit card records, etc.) and put processes in place to

reactivate them.

Sharon Salisbury at the Downwindin Ranch Bed and Breakfast

describes how she re-contacted this group of customers:

I always knew I had a set of regular customers who came back

year after year, but there was a larger group who came to the B&B only

once. So I decided to quantify the number of one timers by going


46/139


47/139

34 CUSTOMER PILLARS

SEARCHING FOR NEW CUSTOMERS

Once youve built a reasonable dam (good customer retention) and

have redirected the spillway back into the lake (reactivated previouscustomers), then by all means, focus on increasing the flow of new

customers into your lake.

So whats the best way to get new customers? This approach may

seem absurdly obvious, but it works: ask yourself how you got the

customers you have. Then do more of that and learn to do it better.

What worked in the past to bring customers into your business has

already been tested and you know it works. So I routinely ask:

What are you not doing now that used to generate new

customers?

Usually I find companies have either (a) stopped doing someimportant things that worked in the past, or (b) are doing some things

well, but are not fully capitalizing on them.

This may not sound exciting, but it is infinitely more likely to

succeed than something completely new. Do not allow your own

boredom or desire for something new get in the way of maximizing

what works.

The hard fact is that new customer strategies are risky. Even

top marketing pros will tell you that for every one idea that works

extremely well, they have tried four or five (or even more) that didnot. Basically, until youve seen a strategy work in your business, with

your offering, with your prospective customers, then its just a test.

And you need to approach it that way.

Many people get so excited about making a conscious decision to

build their companies that they cast aside the old methods and start

brainstorming elaborate, complex, and highly exciting new ways to

get new customers. Until an idea is proven in your company, its only

an experiment.

Frank Hamilton loves telling the story about how he built his

business. At 32 with a wife and two small children, he decided he was

going to start a commercial cleaning business. He worked in a large

office building and saw that the cleaning company did a terrible job.

When Frank asked management why they did not get another

firm, the answer was the current provider was pretty bad, but they

were better than the previous janitorial service. Frank knew he could

do better and saw an entrepreneurial opportunity.


48/139


After doing some research, Frank started the business. He and

a few friends who wanted to make some extra money cleaned in

the evenings. During the day, Frank was out hustling business.

He knocked on doors, attended networking meetings, and winedand dined prospective customers. He even prepared proposals for

prospective clients at home after putting his children to bed. In the

early days he was desperate for revenues and would do anything to

bring customers in the door.

Over the years, Franks business grew dramatically. The number

of employees in his firm grew to 20, then to 100, then to over 500. The

number of locations also grew each year. So did the organizational

structurelayers of management, a sales and marketing department,

and a human resources department. Frank was getting busier and

busier, and his interactions with customers and prospects were fewerand fewer.

One year, after a significant expansion of overheads, Frank

noticed Hamilton Commercial Services was not building new sales

as quickly as it should. When he looked at why, he found he was

failing to do the basic things, and so was his sales and marketing

department. Recently the firm had moved into doing more direct

mail and Web-based marketing. While it made sense to him as a

supplemental strategy, it wasnt what built the company.

Frank started by reviewing his own time. Over the years, hehad become very comfortable selling himself and his company. So

he decided to go back to the streets himself and to bring his sales

and marketing people with him. He budgeted time for face-to-face

customer development activities and leading by example.

The results were predictable. Sales grew and Frank discovered the

important lesson of sticking with what works!

ADDING PRODUCTIVE BUSINESS TO THE MIX

Another strategy for finding new customers is to develop a more

detailed profile of the types of customers you would like to pursue.

Saying you want some new customers is not nearly specific enough.

The work you have already done in customer segmentation will help

you develop a profile of the ideal customer. Doing this will help you

quantify the target market and find those customers.


49/139

36 CUSTOMER PILLARS

Then you can develop a customer hit listthe 20 to 200 (or

whatever appropriate number for your business) specific customers

you want to sell to. Then you can progressively determine the best

ways to approach them.Finding new customers usually means either stealing them from

competitors or creating new customers for the category. If you are

taking customers from a competitor, analyze why they should switch.

Common reasons include convenience or a better product, service,

price, image, or guarantee.

If you are creating new customers, teach them why it is important

to purchase the type of product or service youre selling, which can be

a communications or educational challenge.

At the same time, refer to customers lifetime value. Use it to

estimate how much you can spend to acquire a customer. Typically,finding new customers is quite expensivein fact, in many instances,

its a break even or losing proposition for the first order. But with

repeat orders and ongoing business, it becomes profitable. Knowing

the lifetime value of the customer assists with understanding how

much you should spend (advertising, sales, sampling, etc.) to gain that

new customer.

Another method is to study how others have acquired new

customers, both from inside your industry and outside of it. First, look

for best practices. Identify companies doing a great job buildingtheir revenues, even if they are competitors. You can learn from these

people and use their approaches as a test.

Begin by covertly studying their practicesact like a prospective

customer. Watch where they are advertising and how they are

soliciting new customers. In particular, pay attention when they repeat

these tactics. The strategies they use over and over are probably more

successful than those they abandoned.

If the business is not a direct competitor, simply pick up the

phone and talk to them or offer to buy them lunch. Many successful

companies conduct seminars or have products available that share

their industry specific marketing tips. These are worth studying.

The mastermind group approach organizes a group of

businesses within an industry to compare best practices and assist

each individual member. This allows companies to compare notes on

generating new customers. (Visit www.customerpillars.com for how

to start a new group under our direction.)


50/139


The key to acquiring new customers is keeping old customers

satisfied. You want to ensure that once new customers are acquired,

you retain and profit from them for many years. Have strategies in

place to make this happen!

RECAP: NEW CUSTOMER ACQUISITION STRATEGIES

Study what was successful for you in the past

Develop a detailed, ideal customer profile

Test new strategies as an experiment

Develop a specific customer target list Compare customer acquisition costs to the

Lifetime Value of the Customer

Look for best practices regarding new

customer acquisition

Investigate industry specific marketing programs

Join a mastermind group with others in your

industry

Nearly every company sells to and targets current, previous, and

new customers. The important challenge is to identify the ideal mix

between the three categories and the energies the company puts into

developing each.

Ideally, a company invests time, energy and money into growing

all three. Customer retention and reactivation strategies tend to cost less

and produce better results than new customer acquisition. So if youre

already in business, focus first on developing strong approaches toretention and reactivation, then build in ways to approach new customers.

A startup with no customers will put all its energy into developing new

customers. The key is to make progress in all three areas to produce the

greatest overall increase at the least incremental cost.

The right mix of the three components will vary from company

to company and industry to industry, as well as on your companys


51/139


52/139


problem or pain) and can help with it.

You should also consider root emotional drivers. People often

make decisions based on emotion rather than logicthey follow their

hearts instead of their minds. (Interestingly, we usually sell based onlogic, even though this creates less impact!) Knowing the emotional

factors surrounding the purchase of your products can contribute

significantly to mastering the mind of the customer.

Once, I asked a client who owned a music store, why customers

purchased from him.

Because parents want their kids to participate in music, he replied.

Why is that important to them?, I asked.

Because they want their kids to be active and involved.

Why is that important to

them?Studies show that active

kids are more successful in

school.

Why is that important?

They want their kids to

achieve great things in life.

Why is that important?

Because they want to be

viewed as good parents.Why is that important?

They want to feel good

about themselves.

Again, why is that important?

Well, I guess because they want to improve the quality of their

lives.

Exactly. All consumer purchases track back to one thingto improve

the quality of life. In some way, shape, or form it always comes down to

this. Hence, it is the common root driver when selling to consumers.

Going through this why is that important exercise, you find a

progression of motivating factors that eventually leads you to the root

driving emotion. Through this process, you can see different levels,

and how each one touches the customer.

I usually find the most significant hot buttons are found at levels

deeper than those we initially address. However, they are typically

not at the very deepest level. (Buy from us because it will improve


53/139

40 CUSTOMER PILLARS

the quality of your life, is too trite and not specific enough. However,

selling too close to the surface is not as significant to the customer.) The

best drivers are often found in the middle of that spectrum.

Is there a primary, deepest root motivator for business to business(B2B) purchases? Absolutely.

When selling to businesses, the why is that important exercise

always results in a final answer of because it improves the financial

performance of the business. In every commercial purchase, the ultimate

goal is to improve the profitability, return on investment, or financial

stability of the company. If you sell to businesses, be prepared to converse

about how your product or service ultimately contributes to the financial

health of their business. Incorporating an ROI (return on investment)

component to your B2B presentations will yield significant results.

THEORIES IN MOTIVATION

Inspirational speakers and psychologists talk about two different

types of human motivation. The first is to move towards something

you want. The second is to move away from something you dont

want.

Customers, individuals and companies alike, have towards and

away motivations. Identifying how these factors impact them and theirrelationship with your company can lead to important discoveries.

Sharon Salisbury shared how this impacts her bed and breakfast.

When people come to the B&B, they want to be relaxed, pampered,

and have a new experience. They are moving away from stress,

ordinary life, and boredom. We look at both when we plan how we

want our customers to encounter our company.

Understand how towards and away motivations relate

directly to your product or service. The more you understand about

your customers motivations in their entirety, the more you can

identify new ways to serve them and illuminate ways to assist them

and improve the profitability of your company.

One of the most telling questions you can ask about away from

motivations is What do our customers fear?

Knowledge about customer concerns and fears can significantly

improve your ability to meet customer needs, specifically to help


54/139


calm those specific fears. Here are some examples of when fears

could impact customers:

A printing company is fearful of the impact of technology on

their industry

A teenager is fearful friends will not accept her appearance

A middle aged woman is fearful for her financial future should

anything happen to her husband

A restaurant is fearful nutritional/dietary trends will impact

their customers consumption patterns

A pharmaceutical company is fearful that a competitive firmwill beat them to market with a certain type of drug

If your company sold to one of the customers listed above, would

these fears impact the way you approached them? They certainly

should. Studying the fears of your customers helps you gain a clearer

picture of the mind of your customer.

ONE FEAR EVERY CUSTOMER HAS

Jonathon sells most of his high end audio equipment through a

catalog. His long-term customers are used to this, but new customers

are sometimes leery of buying sight unseen. They are also afraid of

ordering by credit card from an out-of-state company. They wonder:

What if the company takes our credit card information?

What if the item arrives and it is in poor condition?

What if I have a problem with the shipment?

What if I ordered the wrong thing?

These issues highlight a fear present in nearly every transaction

that the company wont deliver what it promised and will betray the

customers trust.

Customer skepticism is common. In fact, customers often believe

the company is guilty, until proven innocent. It is the companys duty

to incorporate specific strategies to reduce this very common fear and

increase the chances of customers doing business with you.


55/139

42 CUSTOMER PILLARS

WAYS TO REDUCE CUSTOMER FEARS

Money back / satisfaction guarantees

Favorable, convenient return policies

Warranties

Quality statements / standards

Sampling programs / free trials

Testimonials

Customer forums

Make contact information very visible

To propel the expansion effort, get inside the customers mind. See

your business through the customers eyes, which is difficult to do,

but gives you ideas for winning in the market. Studying the customer

drivers discussed in this section is a good way to predict and influence the

behavior of the customer base and illuminate opportunities for growth.

RECAP: CUSTOMER DRIVERS

Identify unmet needs

Root emotionsunderstand the progression of drivers

If you sell to consumers, understand how you improve

their lives

If you sell to businesses, relate your product to the

financial improvement (ROI, revenues, profits, etc.) of

that company

Incorporate both away from and towards motivation

Understand customers fears

Reduce the one fear every customer hasthat the

company will fail to fulfill the promises it has made to

them as a customer


56/139


57/139

44 CUSTOMER PILLARS

Clearly define your ideal customers so you can take more

precise steps to attract them into your business

Understand the minds of your customers (even if theyare businesses) including root emotional drivers, towards

motivations, fears, and unmet needs.

Develop approaches to reduce the customers fear that the

transaction will not live up to its promisesthings such as

warranties and guarantees

Make focusing on growth customers an organizational

prioritythis is not just the job of the owner or themarketing department, it should be the emphasis of

everyone in the company


58/139

FOR PERSONAL USE ONLY NOT FOR RESALE

This electronic document is distributed by The FAMEE Foundation

under license from Strive Coaching, Inc, the publisher and holder of

the copyrights associated with this publication. The file is intended for

the individual use of the members of The FAMEE Foundation and may

be printed and used within an individual organization including

copying pages for employees of the individual company. It may not

be reproduced for distribution outside of the members individual

members organization.

The contents of this book should be considered management

thoughts, suggestions, and insights, but do not abdicate the individual

businessperson from making intelligent decisions for running their

specific business in their specific industry. The goal of the book is to

help the reader capitalize on opportunities, but does not reduce or

eliminate the personal responsibility for decisions made in a business

Copyright 2008. All rights reserved.


59/139


60/139


61/139


Pillar Two: Maximize Value Incrementally 47

the customer understanding obtained in the first pillar to see what

benefits they derive. Often it is different than what we think.

Understanding the perceived value of your offering puts you in

a better position to grow. Additionally, the market is an evolving anddynamic environment, so continuous and incremental improvement

is an ongoing requirement. The principle of CANI, or constant and

never ending improvement is relevant. A company on the expansion

path will always look for ways to create more value for customers in

the products or services they provide. Its a journey not a destination.

OUT OF ORDER?

A hand rises in the seminar Im presenting.Didnt you get those two pillars out of order? I mean, dont most

people develop their product first and then figure out who they are

going to sell to next? Your pillars should be switched.

Usually people go into business with a product in mind, then go

out to find a market. This chapter explains why its the value of the

product that drives progress (not the product itself), and this starts

with the customer. This may seem like a very subtle distinction, but

its essential.

When we first opened the store, we thought we were selling homefurnishing items, Susan Miller, co-owner of Your Elegant Home,

commented. But the more we got into it, the more we realized how

passionate people are about

CP Book - Part 1 of 2

Documents

Transcript of CP Book - Part 1 of 2